Bank Indonesia Relaxing Credit Card Regulations to Boost Consumption

May 2020

Bank Indonesia (BI), the central bank of Indonesia, has announced that it will ease regulations on credit cards, through lowering maximum interest rates and late payment penalties, in a bid to increase cashless transactions and boost economic activity.

The central bank has lowered the credit card interest rate to 2% per month from 2.25% and cut the minimum credit card payment in half, from 10% to 5%. BI Governor, Perry Warjiyo, declared that “the regulation would serve as a stimulus for credit card holders and businesses to boost the virus-hit economy”. The new rules were put into force from May 1 and will remain in place until the end of the year.

Household spending accounts for more than half of Indonesia’s GDP. The pandemic is taking a heavy toll on consumption in the country, due to social distancing measures, along with reduction in income and job losses. According to the government’s worst-case scenario projections, 3.78 million people could fall into poverty and 5.2 million could lose their jobs, while the economy could contract by 0.4% during 2020. These steps aim to ease consumers’ burden by helping credit card holders with bill payment and reduce the risk of rising non-performing loans.

(Source: The Jakarta Post)

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