VP Kalla Asks Banks to Cut Time Deposit Interest Rates

KATADATA - Having been urged to reduce their lending rates, Vice President Jusuf Kalla now asks banks to cut their time deposit interest rates because they are considered too high. That’s why the owner of funds and investors prefer to keep their money in banks rather than investing them in the stock market. As a result, 65 percent of public companies in Indonesia are currently owned by foreign investors.

"Interest rate on time deposits is still high so that people are more comfortable with a fixed income," he said at the launch of the program dubbed "Let’s Saving Shares" in the Indonesia Stock Exchange Building, Jakarta, Thursday (11/12).

According to Kalla, time deposit interest rates in Indonesian banks can reach 10 percent per year which is usually applied for deposits above 2 billion rupiah. This is in contrast with the time deposit rate in Singapore that’s only 1 percent, and China of only 2 percent to 3 percent. On the other hand, the average increase in the Jakarta Composite Index (JCI) price in Indonesia Stock Exchange for the period 2010-2014 was around 16 percent-17 percent.

Unfortunately, since the beginning of this year JCI recorded a minus growth of 9 percent. Not surprisingly, many fund owners today prefer to save their money on time deposit products. In order to make stock investment more attractive in the eyes of the public, Kalla added, bank interest should be lowered. "We need a different policy. Bank’s saving interest rate should not be too high so that stock investment would be more desirable," he said.

In addition to high interest rate on time deposits, another obstacle that hampers the development of stock investment in the country is the view or the mindset of the people. There is a notion that investing in stocks is only for a certain market share. "In addition, there are many who consider this investment dangerous because it is interpreted as a speculation," he said.

Looking ahead, Kalla expect all stakeholders, such as Indonesia Stock Exchange and the Financial Services Authority (OJK) to perform an outreach and campaign on the importance of investing in shares. For example, provide lessons to mothers who want to invest in stock so they are able to analyze the risks of the investment instruments.

On the same occasion, Chairman of the Board of Commissioner of OJK Muliaman D. Hadad said that the number of domestic stock investors is still very small which is equal to 0.3 percent of the total middle class population. "That’s why we prepare an outreach and education mainly to the middle class first," he said.