Analysis of Factors that Influence Excess Banking Funds in Commercial Banks in Indonesia

Oct 13, 2025 by leolavanderia.com.br 65 views

Analysis of Factors that Influence Excess Banking Funds in Commercial Banks in Indonesia

Introduction

The banking sector plays a vital role in the economy of Indonesia, providing essential financial services to individuals and businesses. One of the key challenges faced by commercial banks in Indonesia is managing excess banking funds, which can lead to inefficiencies and reduced profitability. Excess banking funds refer to the surplus funds held by banks that are not being utilized for lending or other productive purposes. This study aims to examine the factors that influence excess banking funds in commercial banks in Indonesia, with a focus on the rupiah exchange rate, SBI interest rates, and credit interest rates.

Background

The banking sector in Indonesia has undergone significant changes in recent years, driven by economic reforms and liberalization policies. The introduction of the rupiah as the national currency in 1949 marked a significant milestone in Indonesia's economic history. The rupiah exchange rate has been a critical factor influencing the banking sector, as fluctuations in the exchange rate can impact the value of banks' assets and liabilities. SBI interest rates, which are set by the government, have also played a crucial role in shaping the banking sector. The SBI interest rate is used as a benchmark for other interest rates in the economy, and changes in this rate can have a ripple effect on the entire financial system.

Methodology

This study uses time series data from the fourth quarter of 2002 to the third quarter of 2007 to examine the factors that influence excess banking funds in commercial banks in Indonesia. The analytical method used is Ordinary Least Squares (OLS) with an econometric model. The dependent variable is excess banking funds, while the independent variables are the rupiah exchange rate, SBI interest rates, and credit interest rates.

Results

The results of the analysis show that the rupiah exchange rate and credit interest rates have a negative effect on excess banking funds, while the SBI interest rate has a positive influence. This suggests that when the rupiah weakens, banks tend to have less funds, as they are more focused on hedging or hedging activities to reduce the risk of loss due to exchange rate fluctuations. High SBI interest rates, on the other hand, tend to encourage banks to store more funds in Bank Indonesia (BI), as SBI offers a higher rate of return compared to credit. This can lead to an increase in excess banking funds, as banks have more funds parked in BI and reduce the amount of funds allocated for credit.

Deeper Analysis

Rupiah Exchange Rate

The negative effect of the rupiah exchange rate on excess banking funds shows that when the rupiah weakens, banks tend to have less funds. This is because banks are more focused on hedging or hedging activities to reduce the risk of loss due to exchange rate fluctuations. When the rupiah weakens, the value of banks' assets and liabilities decreases, leading to a reduction in excess banking funds.

SBI Interest Rates

High SBI interest rates tend to encourage banks to store more funds in Bank Indonesia (BI). This is because SBI offers a higher rate of return compared to credit. As a result, banks have more funds parked in BI and reduce the amount of funds allocated for credit. This can lead to an increase in excess banking funds, as banks have more funds available for storage.

Credit Interest Rates

High credit interest rates can hamper credit demand from the public. When credit demand is low, banks will have more unused funds, thereby increasing the amount of excess banking funds. This suggests that high credit interest rates can lead to an increase in excess banking funds, as banks have more funds available for storage.

Conclusion

The regression results show that the three independent variables together have a significant influence on excess banking funds in Indonesia with a reliability rate of 99% (α = 1%). These findings have important implications for regulators and banks in Indonesia. Regulators can use this finding to regulate monetary policy that is more effective in controlling the amount of liquidity in banking. Banks, on the other hand, can use this information to formulate a more appropriate business strategy in managing their excess funds.

Suggestion

Subsequent research can consider other factors that can affect excess banking funds, such as inflation rates, economic growth, and fiscal policy. In addition, research can expand the time period of analysis and use more detailed data to get more accurate and comprehensive results.

Implications

The findings of this study have important implications for regulators and banks in Indonesia. Regulators can use this finding to regulate monetary policy that is more effective in controlling the amount of liquidity in banking. Banks, on the other hand, can use this information to formulate a more appropriate business strategy in managing their excess funds. This can lead to improved efficiency and reduced risk in the banking sector.

Limitations

This study has several limitations. The data used in this study is limited to the period from 2002 to 2007, which may not be representative of the current economic conditions. In addition, the study only examines the effect of three independent variables on excess banking funds, which may not capture the full range of factors that influence excess banking funds.

Future Research

Future research can build on the findings of this study by examining other factors that can affect excess banking funds. This can include inflation rates, economic growth, and fiscal policy. In addition, research can expand the time period of analysis and use more detailed data to get more accurate and comprehensive results. This can provide a more complete understanding of the factors that influence excess banking funds in commercial banks in Indonesia.
Frequently Asked Questions (FAQs) on Excess Banking Funds in Commercial Banks in Indonesia

Q: What is excess banking funds?

A: Excess banking funds refer to the surplus funds held by banks that are not being utilized for lending or other productive purposes.

Q: Why is managing excess banking funds important for commercial banks in Indonesia?

A: Managing excess banking funds is crucial for commercial banks in Indonesia as it can lead to inefficiencies and reduced profitability. Excess banking funds can also lead to a decrease in the bank's ability to lend to customers, which can have a negative impact on the economy.

Q: What are the factors that influence excess banking funds in commercial banks in Indonesia?

A: The factors that influence excess banking funds in commercial banks in Indonesia include the rupiah exchange rate, SBI interest rates, and credit interest rates.

Q: How does the rupiah exchange rate affect excess banking funds?

A: The rupiah exchange rate has a negative effect on excess banking funds. When the rupiah weakens, banks tend to have less funds, as they are more focused on hedging or hedging activities to reduce the risk of loss due to exchange rate fluctuations.

Q: How does SBI interest rate affect excess banking funds?

A: High SBI interest rates tend to encourage banks to store more funds in Bank Indonesia (BI). This is because SBI offers a higher rate of return compared to credit. As a result, banks have more funds parked in BI and reduce the amount of funds allocated for credit.

Q: How does credit interest rate affect excess banking funds?

A: High credit interest rates can hamper credit demand from the public. When credit demand is low, banks will have more unused funds, thereby increasing the amount of excess banking funds.

Q: What are the implications of the findings of this study for regulators and banks in Indonesia?

A: The findings of this study have important implications for regulators and banks in Indonesia. Regulators can use this finding to regulate monetary policy that is more effective in controlling the amount of liquidity in banking. Banks, on the other hand, can use this information to formulate a more appropriate business strategy in managing their excess funds.

Q: What are the limitations of this study?

A: This study has several limitations. The data used in this study is limited to the period from 2002 to 2007, which may not be representative of the current economic conditions. In addition, the study only examines the effect of three independent variables on excess banking funds, which may not capture the full range of factors that influence excess banking funds.

Q: What are the suggestions for future research?

A: Future research can build on the findings of this study by examining other factors that can affect excess banking funds. This can include inflation rates, economic growth, and fiscal policy. In addition, research can expand the time period of analysis and use more detailed data to get more accurate and comprehensive results.

Q: What are the implications of this study for the banking sector in Indonesia?

A: The findings of this study have important implications for the banking sector in Indonesia. The study highlights the need for banks to manage their excess funds effectively to improve efficiency and reduce risk. The study also suggests that regulators need to regulate monetary policy that is more effective in controlling the amount of liquidity in banking.

Q: What are the policy implications of this study?

A: The policy implications of this study are that regulators need to regulate monetary policy that is more effective in controlling the amount of liquidity in banking. This can be achieved by setting interest rates that are more aligned with the needs of the economy. Banks, on the other hand, need to formulate a more appropriate business strategy in managing their excess funds. This can be achieved by diversifying their assets and liabilities, and by investing in more productive activities.