Tuesday, October 14, 2008

Guaranteed Bank Deposit

Economic Crisis has always bring bad impact on our life, that is a well known fact! However, past experience shows that Crisis can also bring positive impact for us, in the sense that it would force us to think and make best efforts for improvements so that we can lead our lives more efficiently and effectively. With regards to the current crisis, our mass media reported this morning that on Monday 13 October, the government has issued two Decrees/emergency laws (PERPU), that would enhance people to increase their savings in the bank, enhance banks to give credits, as follows :
The First Decree amended Law No.25 Year 2004 regarding Saving Guarantee Institution, that increased the amount of Guaranteed Saving Deposits from One Hundred Million Rupiah to Two Billion Rupiah. According to the Minister of Finance Sri Mulyani, this means an increase in guaranteed bank deposits from 10% to 97% of bank deposits owned by 81 Million Depositors.
The Second Decree amended Law No. 3 Year 2004 regarding Bank Indonesia, that eased the condition for banks to obtain Bridging Loans from the Central Bank (Bank Indonesia). Currently, only High Quality and Liquid Assets, among others Certificate of Bank Indonesia and State Bonds, can be used as collateral for Bridging Loans. Now, banks may use their smooth collectible credit assets (Performing Loan) as Collateral.
Actually there is an additional Decree which amend the Law Bill regarding Financial System Security Net which has just been brought to the parliament (DPR).
The above decrees became effective and came into force immediately after their signing by the President on Monday, 13 October 2008.

The 20 fold increase in the amount of Saving Deposits guaranteed by the government will surely bring peace of mind to everyone who has Bank Deposits, but there is no guarantee that it would totally prevent people from buying USDollars. Whilst the ease in condition for Bridging Loans will provide better opportunity for the banks to get broader financial source, thereby making it possible for the banks to provide more loans.

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