Weaker rupiah won’t weight much on Indonesian banks

There is a limited mismatch between their deposits and FX loans, says Fitch.

Indonesian banks should be able to manage the further weakening of the Indonesian rupiah.

Banks have limited direct exposure to currency movements, and any impact would largely be felt through potential strains on borrowers, according to Fitch Ratings.

As of end-April 2025, the Indonesian rupiah has depreciated by around 4% since the start of the year. Coupled with ongoing global trade tensions, raising offshore US dollar bonds could become challenging for Indonesian corporates, the ratings agency said.

“This in turn could reduce funding flexibility for Indonesian corporates that lack a record of onshore rupiah bond issuance and extensive domestic banking relationships,” Fitch said.

Some Indonesian corporate sectors remain exposed to rupiah volatility and offshore bond market sentiments.

Most large developers with sizable US dollar bond exposure have eased liquidity pressure by pushing back maturities, it added.

“Rupiah depreciation is unlikely to pressure Indonesian banks because there is minimal relative mismatch between their FX loans and deposits,” Fitch said, noting that FX loans were 9.2% of total assets whilst FX deposits were 11.1%.

However, banks are more likely to be affected through the impact on borrowers and asset quality.

“That said, regulators have instituted multiple rounds of restrictions on offshore and FX-denominated borrowing since 2014, including minimum hedging requirements, which may mitigate the risk of widespread borrower distress,” Fitch said.