REPUBLIKA.CO.ID, JAKARTA - Bank Indonesia (BI) will provide incentives to encourage merger or consolidation, according to regulation No. 15/15/PBI/2013. 

Each commercial bank is required to have certain amount of reserves in rupiah and foreign currency. Then the regulation says that each bank must obtain primary reserves at least eight percent and secondary reserves of four percent from third party funds. Bank's deposit ratio (LDR) must be within range of 78 to 92 percent, and the bank must have eight percent of foreign currency reserves.

But, BI will provide one percent incentive for one year on primary reserves for merged bank. The new policy is effective since Dec. 31, 2013.

"It (the incentive) is based on the bank's request and approved by Financial Services Authority (OJK)," Governor of BI, Agus Martowardojo, said recently.

Deputy Commissioner of OJK, Mulya E Siregar said that Indonesia had 120 banks and many of them are categorized as small banks. It is expected that the incentive will encourage those banks to merge or consolidation. Siregar said that merger and consolidation will strengthen banking capital. Banks can report their merger plan in 2014's banking business plan. 

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