Credit Is Rising. Is Liquidity Tightening?

Indonesia’s banking system is lending rapidly.

Credit reached approximately Rp9,135 trillion in July 2026, rising 13.58% year on year.[1]

Deposits are growing too.

But more slowly.

Third-party funds reached around Rp10,336 trillion, up 11.21% year on year, pushing the banking system’s Loan-to-Deposit Ratio to 88.38%, slightly above 88.32% in June.[2]

In simple terms, banks are expanding loans somewhat faster than they are gathering new deposits.

Does that mean a liquidity problem is emerging?

Not yet.

Bank Indonesia reported liquid assets equivalent to 23.10% of third-party funds in July, more than twice the 10% minimum reference level.[3] OJK data also put liquid assets to non-core deposits above 100% and the system liquidity coverage ratio comfortably above minimum requirements.[2]

The better description is:

intermediation is becoming more active, making funding economics increasingly important.

What does LDR actually tell us?

LDR compares bank loans with customer deposits.

A higher ratio generally means a larger share of deposits has been deployed into lending.

That can be positive.

Banks exist partly to intermediate savings into financing.

An extremely low ratio can indicate weak intermediation.

But as LDR rises, banks have less relative liquidity sitting outside their loan books.

Funding quality, maturity management and access to liquid markets therefore become more important.

88.38% does not signal a crisis

Bank Indonesia’s macroprudential intermediation framework continues to use an 84–94% target range for its separate RIM measure in 2026.[4]

RIM and LDR are not identical ratios.

Still, the policy range provides context that banking intermediation in the upper-80% area is not inherently abnormal.

Liquidity needs to be assessed through multiple indicators.

LDR.

Liquid assets.

Liquidity coverage.

Funding concentration.

Maturity mismatch.

Access to market funding.

No single ratio can answer every question.

Corporate lending is growing particularly fast

Corporate credit expanded 22.10% year on year in July.[1]

Investment lending increased 25.13%.

Working-capital loans rose 11.04%, while consumer credit grew 5.38%.[1]

That matters because longer-term corporate and investment lending requires sustainable funding structures.

Strong credit demand is positive only if balance-sheet funding can support it.

Why funding matters

Banks perform maturity transformation.

Deposits can be short-term.

Loans can run for several years.

The model works because banks actively manage liquidity and funding.

The relevant question is therefore not just:

How much lending is occurring?

It is:

How is that lending funded?

If deposit growth persistently trails credit growth, banks may need to compete more aggressively for funding or use alternative sources.

Deposits can become more expensive

One straightforward way to attract funding is through more competitive deposit pricing.

That can raise a bank’s cost of funds.

Higher funding costs do not mechanically translate into identical increases in loan rates.

But they affect bank economics.

Loan pricing must cover funding, operating expenses, expected credit losses, capital and return requirements.

This is why businesses should not look only at the central-bank policy rate.

The structure of bank funding matters too.

Funding mix matters as much as funding volume

Current accounts and savings are generally cheaper funding than time deposits.

OJK data for July showed deposit growth outpacing savings growth.[2]

Two banks with the same total deposits may therefore have very different funding costs.

Institutions with strong low-cost deposit franchises can have greater pricing flexibility.

Industry averages hide bank-level differences

The 88.38% LDR is a system average.

Individual banks may be well below or above it.

A retail-funded major bank has a different profile from an institution dependent on corporate deposits.

Digital banks, regional banks and foreign branches also differ.

Corporate borrowers therefore need to understand the balance-sheet position of their actual lenders rather than rely on industry averages.

Bank Indonesia is addressing liquidity segmentation

BI has acknowledged that system-wide liquidity and its distribution are not the same thing.

From September 1, it enhanced its Macroprudential Liquidity Incentive policy.

The maximum incentive was increased to 6% of deposits, from 5.5%, while a new money-market-deepening component aims to reduce liquidity segmentation.[4]

The implication is important.

A financial system can hold ample liquidity overall while individual institutions face different funding conditions.

External funding capacity has also been expanded

BI raised the maximum Bank External Funding Ratio from 35% to 40% of capital, effective July 2026.[4]

The change broadens banks’ funding options while maintaining prudential requirements.

Banks therefore have multiple funding channels.

Deposits.

Interbank markets.

Repo.

Securities.

External borrowing.

Capital markets.

Each carries a different cost and risk profile.

What does this mean for borrowers?

The first effect may appear in loan pricing.

The second may be tenor.

Banks facing tighter funding economics can become more selective about long-dated assets.

The third is risk appetite.

When funding becomes more valuable, institutions may favour borrowers offering stronger risk-adjusted returns.

The fourth is refinancing.

Businesses dependent on a single lender have greater concentration risk.

SMEs can feel changes more sharply

Large corporations often have alternatives.

Bonds.

Syndicated loans.

Capital markets.

Offshore funding.

Multiple banking relationships.

Most SMEs have fewer options.

A small change in banking appetite may therefore matter more to them.

Refinancing should begin early

Companies should not wait until the final weeks before a facility expires.

Review maturities well in advance.

Ask whether rates will reset.

Whether covenants will change.

Whether another lender should be introduced.

Whether internal cash can reduce refinancing needs.

Funding conditions can change before the headlines do.

Rising LDR is a signal, not an alarm

Credit is expanding quickly.

Deposits are also growing.

System LDR has moved slightly higher.

But liquidity buffers, capital and asset quality remain strong.

Bank Indonesia reported a capital adequacy ratio of 23.70% and low aggregate NPLs.[3]

This is not the picture of a system under severe liquidity stress.

It is a system using more of its balance sheet for intermediation.

Better questions for CFOs

Rather than asking:

“Is 88.38% too high?”

Ask:

Is my lender’s funding stable?

Are deposit costs rising?

Is lending appetite for my sector changing?

When will my facility reprice?

What tenor is still available?

Do I have a second funding option?

Those questions are closer to the business impact.

Liquidity is still healthy—but funding has become more strategic

The banking system continues to have meaningful liquidity buffers.

But credit is now growing faster than deposits.

If the gap persists, the competition for funding can increasingly affect lending economics.

For businesses, the important lesson is simple:

credit can remain available while its price, tenor and risk appetite change.

You do not need a liquidity crisis for funding conditions to matter.