Institutional History of Bank Indonesia began the enforcement of Law (UU) No.. 11/1953 on the Determination of the Basic Law of Bank Indonesia on July 1, 1953. In performing his duties as a central bank, Bank Indonesia is led by the Monetary Board, the Board of Directors and Advisory Board. In the hands of the Monetary Board is, monetary policy is set, although responsibility rests with the government. After being merged into a single bank, in the early days of the new order, the basis of Bank Indonesia changed through Law no. 13/1968 on the Central Bank. Since then, Bank Indonesia serves as the central bank and also assist the government in development with a policy established by the government with the help of the Monetary Board. Thus, Bank Indonesia is no longer led by the Monetary Board. Once the order has passed, Bank Indonesia can achieve independence through Law no. 23/1999 on Bank Indonesia as amended by Law no. 3/2004. Since then, Bank Indonesia has a special position in the structure of the state as an independent state institution and freedom from government interference and / or other parties. However, in conducting monetary policy in a sustainable, consistent, and transparent, Bank Indonesia must also consider the general policy of the government in the economy.
After the founding of Bank Indonesia, Indonesia’s monetary policy is generally determined by the Monetary Board and the government responsible for it. Given the poor post-war economy, which was first adopted in the monetary sector are efforts to improve foreign exchange reserves through export and import activities. In the period of guided economy, deficit financing of public finance spending continues to increase, primarily to finance the government’s political project. The rate of inflation continued to soar that monetary tightening was conducted twice, namely in 1959 and 1965. Regardless of the period, the government entered a period of economic recovery through stabilization and rehabilitation program which is then forwarded to the deregulation of financial and monetary fields in the early 1980′s. Amid the ebb and flow of the economy, was born the various economic policy package that aims to strengthen the structure of the Indonesian economy.
Starting mid-1997, the monetary crisis hit Indonesia. The rupiah weakened, threatened jammed payment system, and a lot of foreign debt unresolved. Various steps taken, ranging from monetary tightening to some IMF recovery program obtained through a few of the Letter of Intent (LoI) in 1998. But ultimately bleak future can be reached. The economy is getting better as a stable political conditions at the time of reform. Accordingly, the year 1999 was a milestone for the issuance of Bank Indonesia Law. 23/1999 on Bank Indonesia as amended by Law No.. 3/2004. In this law, Bank Indonesia established as an independent state higher institutions in carrying out duties and responsibilities. As per the law, Bank Indonesia is required to set the inflation target to be achieved as a basis for planning and monetary control. In addition, successful foreign debt rescheduled and cooperation with the IMF ended through Post Program Monitoring (PPM) in 2004.
When he returned to the Unitary State of the Republic of Indonesia (Republic of Indonesia) on August 17, 1950, Indonesia’s economic structure is still dominated by the colonial structure. Foreign banks still dominate the activities of national banks, while the role of the national banks in the country are still too small. Until the eve of the birth of Bank Indonesia in 1953, the supervision and guidance of the banks have not been established. De Javasche Bank was the first foreign bank was nationalized and later transformed into BI as the central bank of Indonesia. A few years later, along with the warming relations between Indonesia and the Netherlands, carried out the nationalization of the banks owned by the Dutch. Next, guided economic system has brought state-owned banks to a single bank systems do not last long. The new order came with a change in banking with the issuance of Law No.. 14/1967 on the Principles of Banking. From then on, the banking system is in system integrity and unity of the leadership, through supervision and guidance of Bank Indonesia. Bank Indonesia with government support, in the period 1971-1972 implement policies curbing private banks with the goal of reducing the number of private banks, because there are too many and mostly consists of small banks were very weak in capital and management. In addition, Bank Indonesia also provide substantial funds through Bank Indonesia Liquidity Credit (KLBI) programs for Small Investment Credit (KIK) / Permanent Working Capital (KMKP), Credit Investment (KI), Student Loans Indonesia (KMI) , Credit Cooperatives (Kakop), Teacher Professional Credit (KPG), and so on. With this move, the central bank has taken the position as the largest provider of funds for economic development outside the state budget.
Indonesia’s banking industry has been the industry’s nearly all aspects of its activities regulated by the government and central bank. Regulation is causing the lack of banking initiatives. Year 1983 is the starting point BI gives freedom to banks to set interest rates, both credit and savings and deposits. The goal is to establish a sound banking system, efficient, and resilient. The next policy is the turning point of the government’s policy in curbing banking in 1971-1972 with the issuance of Banking Deregulation Policy Package 1988 (Pakto 88), the ease of granting new bank licenses, permits the opening of a branch office, and the establishment of rural banks (BPR).
In the next period, national banks began to face the growing problem of bad credit. This is in line with the increase in lending by banks, especially for the property sector. Economic conditions began to heat up and the inflation rate began to rise.
When the financial crisis struck in 1997, the structure of the Indonesian banking mess. On 1 November 1997, liquidating government policy issued 16 private banks. This has led to panic in the community. Therefore, Bank Indonesia fell to resolve the situation with the Bank Indonesia Liquidity Assistance (BLBI) based on policies set by the government. In addition, the restructuring measures implemented by Bank Indonesia and the government.
The payment system in Indonesia is divided into two, namely the system of cash and non-cash payments. In Law (UU) No.. 11/1953 stipulated that the Bank Indonesia (BI) only issue banknotes to the value of five dollars to the top, while the government is authorized to issue banknotes and coins in denominations under five dollars. The first paper money was issued by BI in 1952 marked bills in seven fractions. Furthermore, based on Law no. 13/1968, BI has the sole right to issue banknotes and coins as legal tender in all the fractions. Since then, the government no longer issue paper money and coins. The first coins issued by the Bank are emissions in 1970. In the era of the 1990s, the central bank issued money in large denominations of Rp 20,000 (1992), Rp 50,000 (1993) and $ 100,000 (1999). This was done in order to meet the needs of large denomination along with ongoing economic development at that time.
Meanwhile, in the field of non-cash payments, the central bank has initiated steps to establish itself as the central office of the calculation of the end of 1954. As the central bank, since the beginning of BI has been working hard in the monitoring and restructuring the payment system demand deposits. BI also keep trying to perfect giral various payment system within the country and abroad. In the period from 1980 to the 1990s, economic growth is improving and the volume of non-cash payment transactions have also increased. Therefore, the Bank began to use the system more effective and sophisticated in the settlement of non-cash payment transactions. Various systems such as Semi Automated Clearing Local (SOKL) on the basis of personal computers and the Inter Funds Transfer System and the Integrated Automated Office (MIRACULOUS) with a paperless transaction system to be developed and refined. Finally, BI systems have created a variety of electronic devices such as BI-LINE, Jakarta Electronic Clearing System (SKEJ), Real Time Gross Settlement (RTGS), Information Systems Clearing Distance (SIKJJ), clearing slips between the working area (Intercity clearing), and scriptless Securities Settlement System (S4), which further facilitate the implementation of non-cash payments in Indonesia.
Governor of Bank Indonesia (1953 – present)
Mr. Sjafruddin Prawiranegara Term of Office: 1953 – 1958
Mr. Judge Loekman Term of Office: 1958 – 1959
Mr. Soetikno Slamet Term of Office: 1959 – 1960
Mr. Soemarno Term of Office: 1960 – 1963
T. Joseph Young In Term: 1963 – 1966
Prawiro Term of Office: 1966 – 1973
Rachmat Saleh Term of Office: 1973 – 1983
Arifin Siregar Term of Office: 1983 – 1988
Adrianus Mooy Term of Office: 1988 – 1993
J. Soedradjad Djiwandono Term of Office: 1993 – 1998
Sjahril Sabirin Term of Office: 1998 – 2003
Burhanuddin Abdullah Term of Office: 2003 – present