A fairly strong growth has been recorded for Indonesia's banking industry in the past several years.

Big banks have continued to chalk up an increase in profit. In 2011, the country's banking industry reported an aggregate of Rp75.02 trillion in net profit or an increase of 31.1 percent from the previous year's record of Rp57.3l trillion. The growth was higher than 2010's level of 26.8 percent. Despite the high growth, the country's banking industry still needs to improve efficiency and its intermediacy role. Greater efficiency and intermediacy role are still needed as the growth of the country's banking industry is lacking in quality. The growth is attributable more to monetary policy that allows bank to maintain high lending rates, rather than to operational efficiency. The interest margins between the deposit and loan interest rates in the country are relatively wide compared with in other countries. Banks are not easily cut their lending rates although Bank Indonesia has continued to cut its key rate, the interest rate on Bank Indonesia Certificate (SBI) which serves as the reference interest rate for banks. Credit expansion is also attributable more to consumer credits. Consumer credit contributes to driving economic growth but on the other hand it could bring the economy to facing greater risk of default. Consumer sector has been one of the main drivers of the country's economic growth in the past several years. Banks, therefore, are encouraged to increase credit distribution to the people, but the central bank has signaled it would tighten its monetary policy to minimize the risk and improve banking efficiency and intermediacy role. The central bank in 2012 will adopt a tighter monetary policy to forestall an increase in nonperforming loans. It has raised the down payment for consumer credits especially motor vehicle and housing credits. Another important issue is growing foreign domination of the country's banking industry. Bank Indonesia plans to revise the regulation on foreign ownership in banks in the country. Expansion Marked With Growing Number of Bank Offices Banking expansion in 2011 was marked with the fast growing number of bank branches that shot up to more than 1,000 offices. Micro banks lead in the expansion.