Indonesia Changes Interest Rate Calculation System for Businesses and Banks

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Bank Indonesia has abandoned the interbank rate Jibor in favor of the benchmark Indonia, which is calculated on the basis of transactions in the money market. The aim of the reform is to increase the transparency of the pricing mechanism and strengthen the impact of the regulator’s decisions on the economy. The move comes as part of efforts to accelerate the reduction in borrowing costs for businesses and households, writes Bloomberg.

Previously, Jibor was used to calculate interest rates on bank deposits, swaps, and retail loans, but it was based on quotations from 17 banks rather than on actual transactions. The new benchmark, Indonia, is calculated using all operations in the overnight interbank money market, making it more objective and less dependent on subjective assessments by market participants.

The regulator has introduced a compounded Indonia, which makes it possible to form interest benchmarks for different tenors, similar to those previously calculated on the basis of Jibor. At the same time, a swaps market based on the new indicator has been launched to hedge interest rate risks following the final abandonment of the old benchmark.



In 2025, the key policy rate was reduced by 125 basis points, but borrowing costs fell by only 24 basis points, indicating a weak response of the banking sector to monetary easing. Under these conditions, the shift to a transaction-based benchmark is seen as a way to make the lending market more sensitive to changes in monetary policy.

According to Bank Indonesia, the average daily volume of transactions in the money market could rise from 54 trillion rupiah (about $3.2 billion) in October 2025 to 81 trillion rupiah ($4.8 billion) by 2030. Benny Aroeman, head of markets at Citibank Indonesia, believes the new benchmark better reflects interest rate dynamics and makes the money market more responsive to changes in financing conditions.

Agustina Dharmayanti, executive director for financial market development at Bank Indonesia, notes that the transition is part of a broader strategy to modernize the money and foreign exchange markets. The reform aims to improve their efficiency and bring the country’s financial infrastructure in line with international standards.



Indonesia’s shift to a transaction-based benchmark is also linked to the country’s international commitments as a member of the G20, where a global process of reforming interest rate benchmarks was launched following the abandonment of LIBOR. As part of this agenda, regulators in major economies agreed to move away from quote-based rates toward indicators based on real transactions, in order to reduce the risk of manipulation and increase transparency in financial markets.

Similar reforms have previously been implemented in the United States, the United Kingdom, and the euro area, where traditional interbank rates were replaced by SOFR, SONIA, and €STR, which are used as core benchmarks for national financial systems. In Southeast Asia, comparable reforms have already been carried out in Thailand, where the Thai Baht Interest Rate Fixing was phased out in 2023, and in Malaysia, which plans to abandon the Kuala Lumpur Interbank Offered Rate by 2029.

Wiwig Santoso, head of treasury at PT Bank SMBC Indonesia, notes that although some clients continue to show interest in forward-looking interest benchmarks, the transition to the new benchmark is proceeding without major disruptions. Only a small number of companies have yet to complete the updating of contracts and the addition of fallback clauses that automatically switch calculations to Indonia.

Analysts at International Investment note that the changes reflect Bank Indonesia’s efforts to integrate the national money market into the global architecture of transaction-based benchmarks and reduce the gap between official monetary policy and the real cost of borrowing in the economy. The success of the reform will largely depend on how quickly the financial and corporate sectors adapt their products and contracts to the new system for calculating interest rates.