About Indonesia

Indonesia is Southeast Asia's largest economy and a manufacturing hub for the region. The country is viewed as an evolving local financial centre for the Southeast Asia markets. Foreign exchange controls in Indonesia make it advantageous for companies with significant operations there to have a base in the country.

The Indonesian government has introduced a series of economic reforms that ease foreign ownership of businesses. The country has become a sought-after destination for Chinese firms to locate their businesses, as their own market becomes increasingly saturated. Indonesia is also an important component of the One Belt One Road initiative, given its strategic landscape in Asia Pacific.

China is now the third largest investor in Indonesia after Singapore and Japan, and is looking to divert excess manufacturing capacity offshore to Indonesia, further reinforcing its status as a manufacturing hub.

Along with nine other ASEAN members, Indonesia will be pushing forward for ASEAN Economic Community (AEC) 2015. Collectively, the AEC will form the third largest economy in Asia and the seventh largest in the world, providing enhanced connectivity and an even more inclusive community integrated with the global economy.


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Corporate Treasury in Indonesia

Indonesia is South East Asia's largest economy and a manufacturing hub for the region. Here, we highlight some of the key benefits relevant to treasury and cash management in Indonesia.


Financial Market Development

  • The World Economic Forum ranks Indonesia 49th in the world for financial market development in The Global Competitiveness Report 2015-2016.
  • The report also states that the country is ranked 74th for the soundness of its banks. The quality of infrastructure and the labour pool is limited.
  • The financial sector is developing, but ongoing deregulation in a number of industries is boosting the banking sector and increasing the attractiveness of investing in Indonesia.
  • Indonesia has a developing Islamic finance subsector, with 12 Islamic commercial banks, which along with the Shariah business units of conventional banks have assets of IDR 273.48 trillion, accounting for 4.6% of total commercial bank assets.  
  • BKPM, the Investment Coordinating Board of the Republic of Indonesia, is the primary interface between business and government, and aims to boost domestic and foreign direct investment through creating a conducive investment climate.


Sophistication of Banking Systems

  • There are 118 commercial banks in Indonesia, with three-large state controlled banks dominating the sector. Indonesia's Financial Services Authority (OJK) has set out plans to strengthen the sector through consolidation, reducing the number of banks to 60-70 within 10 to 15 years.
  • There are 10 foreign banks in Indonesia, and more than 20 foreign banks have representative offices in Jakarta.
  • Indonesia has some foreign exchange controls restricting the movement of rupiah from banks within Indonesia to offshore banks. All domestic transactions must be carried out in rupiah, although there are some exemptions for foreign firms. Companies must also submit reports on their foreign exchange activities and plans to obtain offshore loans to Bank Indonesia.


Regulatory Bodies

  • Indonesia's Financial Services Authority regulates the banking sector. It is committed to adopting international regulatory standards. Bank Indonesia (BI) is responsible for maintaining the stability of the rupiah.
  • Bank Indonesia is the central bank.



  • Corporate income tax is charged at a flat rate of 25%.
  • Income received by a resident company from interest on saving deposits and Bank of Indonesia certificates is subject to a final income tax of 20%, interest on bonds is subject to a final income tax of 15%, and proceeds from the sale of shares on Indonesian stock exchanges are taxed at 0.5% if certain conditions are met.
  • Stamp duty is payable as a fixed amount of either IDR6,000 or IDR3,000 on certain documents.
  • Interest on loans is generally deductible.
  • Withholding tax is charged on dividends, interest and branch profits. Rates vary between 0% and 20%, according to resident status and tax treaties.
  • Indonesia has tax treaties with more than 70 countries and territories.


Benefits for Local Treasury

  • Foreign-exchange controls in Indonesia make it advantageous for companies with significant operations there to have a base in the country.
  • Jakarta is viewed as an evolving local financial centre, and has the potential to become a regional hub for South-east Asia.
  • Macroeconomic stability is improving but Indonesia continues to experience significant currency volatility.
  • For resident companies cash concentration, particularly through zero balancing, is offered by a number of cash management banks in Indonesia. Cross-border sweeping and notional pooling is also available to resident companies.
  • Non-resident companies cannot borrow funds in Indonesia, so cannot participate in a cash concentration or cash pooling structure.




Banking System

  • State-run banks dominate Indonesia's banking sector, with three of the four main banks being majority state-controlled: Bank Mandiri, Bank Rakyat Indonesia and Bank Negara Indonesia. The fourth main bank is Bank Central Asia, which is privately owned. There are plans to form a holding company to manage the four state-run banks (Bank Tabungan Negara is the fourth state-run bank).
  • There are a total of 118 commercial banks, of which 52 are regional government banks and 12 are Islamic banks. In addition, there are 10 foreign-owned banks.
  • Islamic banking has an increasing presence in the banking sector, with 12 Islamic banks and 22 banking units within regular banks. It accounted for 5.5% of the banking sector’s total assets at end-2015. There are plans to merge the Islamic banking units of the four state-run banks and establish one Shariah-compliant bank.
  • There are restrictions on foreign banks opening in Indonesia, and only the top 200 banks in terms of assets are permitted to have a presence. Despite this, foreign banks do have an active role in its banking sector.


Bank Accounts

  • Residents may hold foreign-exchange accounts domestically and overseas. However, they are not permitted to hold domestic currency (IDR) accounts overseas, although local IDR accounts can be converted to foreign exchange.
  • Non-residents may hold foreign-exchange and IDR accounts, and foreign currency is freely convertible. Non-residents may only hold current, savings and time deposit accounts. A non-resident is only permitted to receive a transfer in IDR for an economic transaction, and must have supporting paperwork. Overdraft facilities are not available to non-residents.


Legal and Regulatory

  • The Financial Service Authority supervises the banking sector.
  • A company incorporated or domiciled in Indonesia is considered a resident company.
  • Indonesia has anti-money laundering and counter-terrorism legislation is in place, is a member of the Asia/Pacific Group on Money Laundering (APG) and has a financial intelligence unit, the Indonesian Financial Transaction Reports and Analysis Centre (PPATK), which is a member of the Egmont Group.
  • Indonesia is a member of the Association of Southeast Asian Nations (ASEAN).




Payment Systems



Indonesia's national interbank real-time gross settlement (RTGS) system


  • Used for high-value (more than IDR100 million) and urgent IDR-denominated interbank transfers.
  • Operated by Bank Indonesia.
  • Final settlement done in real time across participant banks' accounts with Bank Indonesia.
  • Effects final settlement of net balances originating from the SKNBI.




Indonesia's national automated clearing system

  • Used for low-value (less than IDR 500 million), non-urgent and bulk interbank transfers and paper-based transactions.
  • Operated by Bank Indonesia.
  • Divided into Credit Clearing (low-value credit transfers) and Debit Clearing (paper-based payments; e.g. direct debits and cheques).
  • Final settlement done via BI–RTGS across participant banks’ accounts with Bank Indonesia same or next working day.




Payment Instruments


Credit Transfers

  • High-value (more than IDR100 million) and urgent credit transfers settled via BI–RTGS same day. Larger sums (but less than IDR500 million) may be settled via SKNBI Credit Clearing.
  • Low-value (less than IDR500 million) and bulk credit transfers are settled via SKNBI Credit Clearing on same working day (5 batches a day).


Direct Debits

  • Available when the sender and receiver have accounts with the same bank.
  • For interbank transactions, BI has launched a direct debit service that allows transactions across participant banks. 



  • Common form of cashless payment, especially in commercial transactions.
  • Bilyet giros can be used (not exchangeable for cash).
  • Must be presented within 70 days of issue by authorised party.
  • Bilyet giros and cheques are cleared via SKNBI Debit Clearing with maximum limit of IDR 500 million (per bilyet giros / cheques) and final settlement via BI–RTGS next working day.


Card Payments

  • Debit cards are becoming increasingly common, although payment cards have low usage.
  • Debit cards are issued by 62 banks, credit cards by 23 banks and ATM cards by 113 banks.
  • Visa, MasterCard and JCB International are the main brands of credit cards used, and all are Europay, Mastercard and Visa (EMV)-compliant.
  • There are three domestic ATM networks (Bersama, Prima and ALTO) and two international ATM networks (Cirrus and Plus).
  • There are four POS networks in use, Visa, MasterCard, Debit BCA network and Kartuku.
  • Electronic money schemes are in use through top-up, prepaid cards.


Other Payment Formats

  • Postal orders are available through the Indonesian post office.
  • Cash is a common mode of payment for retail and low-value transactions.
  • Mobile banking is available and is used for retail transactions, but the uptake is low (0.3%), largely due to the fact that a low proportion of Indonesians have bank accounts (36%). However, it is forecast to grow in future.
  • Reloadable mobile wallets are a popular form of cashless payment for retail and low-value payments. Tcash, Dompeku, XL Tunai and DOKU are four of the main brands of mobile wallets.



Recent developments


New Rules Aim to Boost Lending

Bank Indonesia has announced new rules giving banks greater flexibility in the way they manage liquidity and credit in a bid to boost lending. The central bank has set a target of year-on-year credit growth of 10% to 12% for 2018, but annual bank credit grew by just 8.2% in February. The new rules include an easing in the reserve requirements imposed on banks, while they will also no longer be paid interest on funds above the required level that they hold with the central bank.

Read more about the development here


National Payment Gateway on Track

Preparations for the launch of the second phase of the National Payment Gateway are on track. The first phase of the initiative, which was launched in December, saw the rollout of infrastructure sharing by a number of banks to cut the cost of interbank transactions, as well as the introduction of cashless payments for toll road users. The second phase will enable lenders to cut cross-bank transaction costs through more efficient processes, and provide payment facilities for 20 utilities, such as electricity and phone bills.

Read more about the development here


Central Bank Joins CPMI

Bank Indonesia has had its membership of the Committee on Payments and Markets Infrastructure (CPMI) approved. The committee is the global standard setter for the payment, clearing and settlement systems that support global markets, and covers 86% of the world economy. It aims to deliver secure and efficient payment systems, as well as tackle issues such as cyber security, digital innovation and financial inclusion.

Read more about the development here.



This Market Profile is brought to you by DBS. Get in touch with us for further insights on doing treasury in Indonesia and take advantage of our innovative solutions to empower your business. Click here to find out more.



Sources: IMF World Economic Outlook database, October 2016; CIA World Factbook; Trading Economics; PwC

Please note that the information contained in this document, assembled based on information available and accurate as at July 2017, is of a general nature only and is subject to change whether for economic, political, social or other reasons.


Last updated on 20 May 2018