The Banking Sector in Indonesia

The Banking Sector in Indonesia

            In Indonesia, there are two types of banks i.e. Central Bank and Commercial Bank. Indonesia's Central Bank is Bank Indonesia, which is an institution / agency responsible for maintaining economic stability / monetary policy in a country. Central Bank to keep inflation under control and always be at the fixed lowest value or the optimum position for the economy (low / zero inflation), by controlling the balance of the amount of money and goods. Commercial Bank is a financial institution offering a variety of services for money products and services to the public with such a function to raise funds directly from the public in a variety of forms, giving credit to the people who need loans, buying and selling foreign currency / exchange, sell insurance, current accounts, services checks, valuables receiving care, and etc. Commercial banks are for profit / commercial.

             According to Law No. 10 of 1998 dated 10 November 1998 about the banks, it can be concluded that the banking business comprises three activities: collecting funds, distributing funds and providing other banking services. Beginning in the 1980s the number of private banks was growing rapidly, so bring Indonesia's growing economy. The banking sector has a big in mobilizing public funds for various purposes. Previously, the banking sector was just a facilitator of government activities and some large companies, and has now turned into a very influential sector of the economy.

Achievement Indonesia's banking sector is due to monetary policy being closely watched by governments and central banks, overall coordination, as well as reform and business strategy. Under the supervision of BI, the banking sector refining management and monitoring system, as well as continue to improve standardization and operational. In addition, the banking sector also focused professionalism of management and prioritizing increased efficiency. Another factor, the banking industry has always revolved around the development of the national economy, so the support to national development also brings considerable profits. For example, banks support the development of infrastructure such as electricity, traffic, irrigation and telecommunication, and give credit

            Another key factor is the pro-UKM loans. The banking sector followed a strategy of channeling capital to UKM, thus creating more jobs and helping the government reduceunemployment and poverty. BI argues, the banking system is now more perfect and more able to deal with the risk. The threat of inflation has also been dealt with effectively.

            The conditions of banking sector in Indonesia is improving despite the global financial crisis pressures increasingly. This is evident from the reduction in liquidity crunch and the growth of total bank credit. Indonesia's economy is still experiencing ups and downs, the government deregulation and de-bureaucratization run gradually in the financial sector and the economy. One purpose of the policy of deregulation and de-bureaucratization is an attempt to build a healthy banking system, and efficient. The impact of over-regulated the banking system is stagnant conditions and the loss of banking initiatives. It is encouraging BI to modernize the banking deregulation of banking in accordance with the demands of the customers, business, and economic life cyle.