As of late 2025, the Indonesian Financial Services Authority (Otoritas Jasa Keuangan, “OJK”) has reportedly called for banks within the Core Capital Group (Kelompok Bank Berdasarkan Modal Inti, “KBMI”) 1 to increase their core capital. Although the OJK itself has yet to release a public statement on the foregoing, publicly available news has further stated that this initiative is part of OJK’s larger plan to phase out the KBMI 1 category altogether.

Currently, OJK Regulation (“POJK”) No. 12/POJK.03/2021 on Commercial Banks groups banks into 4 (four) categories based on their core capital, with the following breakdown:

1. KBMI 1: Bank with core capital of up to IDR6 trillion;
2. KBMI 2: Bank with core capital of more than IDR6 trillion, and up to IDR14 trillion;
3. KBMI 3: Bank with core capital of more than IDR14 trillion, and up to IDR 70 trillion; and
4. KBMI 4: Bank with core capital of more than IDR70 trillion.

Should OJK proceed with erasure of the KBMI 1 category, banks would be required to maintain core capital exceeding IDR 6 trillion. As a result, smaller banks would need to either strengthen their capital base, or pursue mergers, consolidations, or acquisitions in order to meet the revised threshold.

Options to Increase Core Capital

Generally, POJK No. 11 of 2016 on Minimum Capital Requirement for Commercial Banks (as amended from time to time, latest by the POJK No. 27 of 2022) regulates that core capital consists of:

1. Main Core Capital (Common Equity Tier 1), consisting of paid-up capital and disclosed reserves, and
2. Additional Core Capital (Additional Tier 1).

Accordingly, one of ways for banks to strengthen their core capital is by increasing their paid-up capital.

Alternatively, banks may pursue mergers or consolidations with other small banks, resulting in one bigger bank with higher capitalization.

Regardless of which of the above option banks opt for, they will have to comply with strict regulatory requirements, including to obtain shareholder approval or meet disclosure requirements. Furthermore, banks will need to carefully consider the potential implication of dilution of existing shareholders.

Implications

This call for banks to maintain higher and stronger capital levels can lead to positive outcomes, as stronger capitalization generally means enhanced liquidity and support greater lending capacity. This could therefore be beneficial for both investors and borrowers. Furthermore, this can also lead to higher barriers of entry for new players, making new entrants in the banking sector be better capitalized as they need to meet the KBMI 2 threshold and above.

However, this can also lead to less positive outcomes, such as:

1. Potentially Fewer Banking Options: Due to both higher barriers of entry, which may make new players less eager to enter the market, and due to banks pursuing mergers/consolidations. 

    

   Reduced banking options may cause increase in lending rates, and further may affect access to banking services for certain customer segments, including less financially literate or underserved groups. Of course, it is noted that regional development banks (Bank Pembangunan Daerah) are said to not be subjected to this requirement, however, the risk is not negligible as several digital banks, being an accessible entry point for such customer segments, are currently still classified as KBMI 1.

2. Loss of Jobs: If many banks decide to merge or consolidate, they may need to let go of certain employees, thus putting people out of jobs.

As of the moment, OJK has not made any official public announcement regarding the elimination of the KBMI 1 category, nor a clear timeline for its implementation. Hence, the situation remains in a “wait-and-see” phase. However, it is in any case important for authorities to carefully plan this erasure the KBMI 1 category, as it has significant societal impact. The process must be structured to deliver its positive outcomes, such as stronger banks, without resulting in disproportionate adverse impacts on investors or borrowers.