Banking reforms in Indonesia : effects on the banking industry

• Main Authors: Lim, Ping Ping, Tan, Agnes Hai Hui, Soon, Iris Sin Ling
• Other Authors: Annie Tsai
• Format: Final Year Project
• Language: English
• Published: 2015
• Subjects: DRNTU::Business::General::Government policies
• Online Access: http://hdl.handle.net/10356/63682
• Institution: Nanyang Technological University

Indonesia government embarked on a series of deregulatory measures in order to improve the efficiency and effectiveness of its banking sector. The first package became effective in 1983 with subsequent packages being implemented in 1988, 1989, 1990, 1991 and 1992. A study of the impact of the reforms on the state, private and foreign/joint-ventures banks is provided. The reforms had promoted competition in the Indonesian banking industry. As a result of intense competition, the dominance of the state banks was reduced and their profit figures also suffered. However, those of the private and foreign/joint-ventures banks continued to grow. With the rapid expansion of the industry, bad debts, excess liquidity and shortage of banking professionals were among some of the problems that plagued the banks. Overall, the operational efficiency of the banking sector had improved. As the reform is an on-going process, the regulators must continue to keep a close watch on the future developments of the banking industry. The success of the reforms will in tum affect the growth of the economy.