Expansion of Instruments & Strengthening of Foreign Exchange Monetary Operations under PADG 21/2026

Introduction

On 29 July 2026, the Member of the Board of Governors of Bank Indonesia stipulated Regulation of the Members of the Board of Governors Number 21 of 2026 concerning the Fourth Amendment to Regulation of the Members of the Board of Governors Number 21 of 2025 concerning Foreign Exchange Monetary Operations (“PADG 21/2026”). PADG 21/2026 strengthens foreign exchange monetary operation instruments through foreign currency term deposit transactions, hedging swap transactions, and hedging domestic non-deliverable forward (DNDF) transactions by expanding the types of transactions, transaction underlying, and/or foreign currencies that may be transacted. PADG 21/2026 was established in response to increasingly complex financial market dynamics and Bank Indonesia’s need to strengthen monetary control, particularly in maintaining the stability of interest rates, exchange rates, and foreign currency liquidity in the domestic market. The expansion of these instruments is expected to support the deepening and development of the money market and foreign exchange market in Indonesia, while simultaneously strengthening the stability and competitiveness of the domestic financial market.

Comparison

PADG 21/2026 introduces several substantive changes to the provisions previously regulated under Regulation of the Members of the Board of Governors Number 21 of 2025 concerning Foreign Exchange Monetary Operations (“PADG 21/2025”). These changes include the expansion of the types of foreign currencies that may be used in term deposit transactions, the addition of hedging swap transaction instruments, and adjustments to the registration mechanism for treasury dealers for each type of foreign currency. The principal changes in PADG 21/2026 compared to PADG 21/2025 are as follows:

Key Provisions

• Currency Flexibility in Foreign Currency Term Deposits 

As regulated under the amendments to Article 57 paragraph (1) letter a and Article 262 paragraph (1) letter a, the scope of Foreign Currency Term Deposit Transactions (both Conventional and Sharia) is now expanded to include United States dollars as well as other foreign currencies to be specifically determined by Bank Indonesia. For foreign currency transactions other than United States dollars, the determination of the multiples applicable to interest rate bid submissions and the nominal value limit for early termination will be separately announced by Bank Indonesia. This expansion provides more adaptive liquidity flexibility for banks beyond the United States dollar ecosystem.

• New Instrument: Conventional Hedging Sell Swap Transaction 

This regulation introduces Part Seven A (Articles 171A–171C), which accommodates Conventional Hedging Sell Swap Transactions to Bank Indonesia. These bilateral (non-auction) transactions, with a maximum tenor of 12 months, require the use of a valid Transaction Underlying, must be controlled by 1 Hedging Contract, and may not be terminated prior to maturity (early termination). The Transaction Underlying document must be final, have a remaining tenor of at least 10 calendar days before the Hedging Contract expires, and have a corresponding nominal value.

• Administrative Sanctions and Financial Penalties

Closing

PADG 21/2026 expands and strengthens Bank Indonesia’s foreign exchange monetary operation framework through increased flexibility in the types of foreign currencies available for Term Deposit Transactions, the introduction of Conventional Hedging Sell Swap Transaction instruments to Bank Indonesia, as well as adjustments to operational provisions and the imposition of sanctions. These changes provide BI with greater scope to manage foreign currency liquidity and risks, while also maintaining exchange rate stability and supporting the deepening of the money market and foreign exchange market.