Right now, Indonesian banks are competing so hard to bring in fresh funds from customers. Why is that? That’s because Iedul Fitri is coming, Christmas follows, and new year’s just around the corner. At these times, the demand for cash will increase. To cope with this predicted increase in cash demands, banks offer a high deposit interest rate so people would bring in cash for them.
However tempting these offers may be, customers should still be considerate in choosing which bank they should save their money in. The Bank of Indonesia (BI) through the Savings Guarantor Council (Lembaga Penjaminan Simpanan) aims to protect customers fund. So if the a bank for some reasons become unhealthy and is forced to shutdown, customers savings will be refund. However there is a limit to how much the council will refund. The council will refund deposits with interest rate of 11.50% (1 month period), 11.55 % (3 month period), 11.60% (6 month period), 11.75% (12 month period), and 12.05% (24 month period).
Right now a lot of banks are already offering interest rates exceeding the limits that BI is willing to guarantee the safekeeping. Now for example, if a bank can promise you an interest rate of 14% for your deposit, from where will they cover the extra %-age if the bank should collapse? Good question to ask their customer service agents ;)
Right now deposits seems to be a reasonable method of investing your money safely, as long as it is planned well, and that customers examine the banks performance well. It reminds me of the time back in 1995/1996 just before the monetary crisis, where interest rates were high. This high deposit interest rate drives credit interest rates to be higher (credit interest rates is usually 8% above the deposits interest rates). Debitors then couldn’t pay their bank loans; causing a significant increase in the banks non-performing loans (NPLs), which eventually forced a lot of banks to shutdown.
Spend your money wisely… but save your money wisely also.