PPSK Law: Banking

The Impact of the Financial Sector Omnibus Law on the Indonesia Banking Sector

01 March 2023

Law No. 4 of 2023 regarding the Development and Strengthening of the Financial sector ("PPSK Law") is a financial sector omnibus law that integrates around 17 (seventeen) laws from the financial sector. The term 'omnibus' is derived from the Latin language with the meaning 'for everything'. So, in general, an omnibus bill is a single bill that may include separate and diverse legal matters but will be processed by the legislature as a single document.


As part of the financial sector, the banking sector will certainly be affected by the passage of the PPSK Law. It is known that previously the banking law was regulated in Law No. 10 of 1998 on the amendment of Law No. 7 of 1992 on Banking (“Banking Law”). The background and main contents of the PPSK Law are dedicated to creating inclusive economic growth and it is hoped that the positive economic growth obtained will be sustainable.


There are several important things to know about the impact of the PPSK Law on the banking industry, namely related to important efficiency in providing easier access to credit or financing for all economic actors, especially Micro, Small and Medium Enterprises (“MSMEs”). In addition, it also strengthens the function of the Rural bank also known as Bank Perkreditan Rakyat  in the Banking Law, by expanding its business fields that we know today towards foreign exchange and fund transfers, and changing its name to the Bank Perekonomian Rakyat (“BPR”) in PPSK Law.


There are some substantial changes that are interesting for readers to know. Based on this information will be explained by the table below:




Banking Law 



Transfer of Bank of Indonesia (“Bank Indonesia” or “BI”) functions to the Financial Services Authority (“Otoritas Jasa Keuangan” orOJK”)


Previously, the guidance, supervision and licensing of banks' activities were conducted based at BI.



As for now, the supervision carried out by the OJK on the Bank is carried out both directly and indirectly. In addition, licensing is also regulated based on OJK provisions.






Forms of Legal entity


That previously regulated the legal form of a Commercial Bank can be in the form of a Limited Liability Company, Cooperative, or Regional Company. Whereas Rural bank or Bank Perkreditan Rakyat can be in the form of one of: regional company, cooperative, limited liability company, other forms stipulated by Government Regulation.


Currently, it is regulated that Commercial Banks can only take the form of a limited liability company. Meanwhile, BPR are limited liability companies or cooperatives.






 The term BPR


Known as rural bank or Bank Perkreditan Rakyat. Previously, were not involved in foreign exchange, but were limited only to serving time deposits and savings accounts.


There is a change of term called BPR. This change was motivated to provide financial services like conventional banks in addition to lending, such as foreign exchange.






Public offering




Now BPR can conduct public offerings on the stock exchange through an initial public offering mechanism with provisions regulated by OJK.






Establishment of BPR


Rural bank or Bank Perkreditan Rakyat can be established and owned by Indonesian citizens, Indonesian legal entities whose owners are all Indonesian citizens, local governments.


Stating that BPR only can be established by Indonesian citizens and Indonesian legal entities.







Credit matters




It is currently stipulated that commercial banks have obligations related to bank activities in channeling funds in the form of credit or financing for the MSMEs sector and/or sustainable financing based on sharia principles.






Banks in financial difficulty




One of the impacts of the legalization for the PPSK Law for banks, known as the bank in resolution, is a bank that is experiencing financial difficulties. At this state, its business continuity is also in a position that can no longer be nourished by the OJK.


To be able to imply the whole context above, please keep in mind to in line with OJK and BI regulations.


Should there be any queries related to this regulation or to find out if this effects your business or personal interest, please do not hesitate to contact us.

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