Legal Research about the Bank Perkreditan Rakyat (BPR) in Indonesia

I. INTRODUCTION

Rural Banks, hereinafter abbreviated as BPR, are banks that carry out conventional business
activities which in their activities do not provide services in payment traffic. BPR activities are much
narrower than those of commercial banks because BPR are prohibited from accepting demand
deposits, foreign exchange activities, and insurance.

The following are efforts that can be carried out by BPR:

a. collect funds from the public in the form of Deposits in the form of Savings and Time
Deposits and/or other equivalent forms;
b. disbursing funds in the form of Credit or Financing Based on Sharia Principles;
c. carry out fund transfer activities both for their own interests and for the interests of the
Customer;
d. placing funds at other Banks, borrowing funds from other Banks, or lending funds to other
Banks;
e. carry out foreign currency exchange business activities;
f. carry out equity participation in BPR supporting institutions in accordance with the
restrictions stipulated in the provisions of laws and regulations;
g. cooperating with other LJKs and non-LJKs in providing financial services to customers;
h. perform receivables transfer activities; and/or
i. carry out other activities with the approval of the Financial Services Authority. 1

As a Rural Credit Bank, BPR has several business limitations, namely:

a. accept Deposits in the form of Demand Deposits;

b. conduct business activities in foreign currencies, except foreign currency exchange business
activities;
c. carry out capital participation, except as referred to in Article 13 paragraph (1) letter f;
d. purchase Securities, except for those issued by Bank Indonesia, the Government, or Regional
Governments;
e. conducting insurance business, except for marketing insurance products in the framework of
cooperation as referred to in Article 13 paragraph (1) letter g; And
f. carry out other businesses outside the business activities as referred to in Article 13. 2

BPR was founded by:

1) Indonesian citizen; and/or

2) Indonesian Legal Entities.

In carrying out its business, BPR can take the form of:

1) Limited Liability Company (PT);

2) Cooperative.

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Development and Strengthen Financial Sector Law Number 4 of 2023 Article 14 Point 9
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Development and Strengthen Financial Sector Law Number 4 of 2023 Article 14 Point 11
II CAPITAL

Based on OJK Regulation Number 62 of 2020, the amount of paid-up capital is determined based on
the division of zones for the establishment of BPR as follows 3:

ZONE PROVINCE PAID UP CAPITAL

1 All province in Java and Bali 100 Billion Rupiah
2 All Province in Sumatra, 50 Billion Rupiah
Kalimantan, South Sulawesi,
Center Sulawesi, and West
Nusa Tenggara
3 Gorontalo, North Sulawesi, 25 Billion Rupiah
West Sulawest, Southeast
Sulawesi, Papua, West Papua,
Maluku, North Maluku, East
Nusa Tenggara

The placement of paid-up capital must comply with the following conditions:

1) Paid-up capital must be placed in the form of a deposit at a commercial bank or other BPR
on behalf of “OJK Board of Commissioners q.q. (name of prospective shareholder and/or CS
of the BPR)” with a description for the establishment of the concerned and the
disbursement of it can only be made after obtaining approval from the OJK.
2) Placement of paid-in capital in the form of deposits shall be made in full in the amount of
paid-up capital required according to the zone at the time of submission of the application
for approval in principle for the establishment of the BPR.
3) Paid-up capital for the establishment of an BPR must be used for working capital of at least
50%.

III. GENERAL PROVISION OF OWNERSHIP OF BPR

Existence of Controlling Shareholders (CS)

1) Each BPR is required to have at least 1 shareholder with a share ownership percentage of at
least 25% in accordance with OJK regulations regarding Fit and Proper Test for Main Actors
in the Banking Sector;
2) Sources of funds for BPR ownership are prohibited:
a. originating from loans or financing facilities in any form from banks and/or other
parties.
b. originating from and for the purpose of money laundering and/or financing of
terrorism as well as the proliferation of weapons of mass destruction.

Changes in Share Ownership that Result in Changes in Controlling Shareholders (CS)

1) The BPR is required to obtain OJK approval to make a change in share ownership resulting in
a change in CS.

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Article 6 Paragraph 1 OJK Regulation Number 62 of 2020 about BPR
 2) In the event that a change in share ownership or additional paid-in capital results in a
takeover, the procedure for changing share ownership is carried out in accordance with OJK
Regulations concerning BPR Acquisitions
3) In the event that the takeover as referred to in paragraph (2) is carried out by an individual,
the BPR that is being taken over together with the party making the takeover prepares a
takeover plan at least in the form of an analysis of the financial capability of the prospective
CS along with projections for the next 3 years prepared by an independent consultant .
4) Analysis of the prospective CS's financial capacity can be in the form of an asset growth plan
or funding readiness for the prospective individual CS within the next 3 years prepared by a
party that has the ability to prepare financial analysis.

IV. GENERAL PROVISION ABOUT DIRECTOR AND COMMISSIONER

General requirements for BPR Directors and Commissioners include:

1) Adequate and relevant knowledge in banking sector;

2) Experience and expertise in banking or finance for at least 2 years;
3) Ability to carry out strategic management in the context of developing BPR.

Specific requirements for the Board of Directors include:

1) All members of the Board of Directors must reside in the same district/city, or different
districts/cities in the same province or districts/cities in other provinces that are directly
adjacent to the district/city in the province where the BPR head office is located.
2) Members of the Board of Directors are prohibited from holding concurrent positions at
banks, other Financial Services Institutions, and/or other institutions except as
administrators of BPR industry associations and/or educational institutions that aim to
increase the competence of BPR HR as long as they do not interfere with carrying out their
duties as BPR directors.

Specific requirements for Commissioners include:

1) All members of the Board of Commissioners must be domiciled in Indonesia, and at least 1
member of the Board of Commissioners must reside in the same province or in a district/city
in another province which is directly adjacent to the province where the BPR head office is
located.
2) Members of the Board of Commissioners are prohibited from holding concurrent positions
as commissioners in more than 2 other BPRs or BPRS.
3) Members of the Board of Commissioners are prohibited from holding concurrent positions:
a. as a member of the Board of Directors or Executive Officer at another Financial
Services Institution supervised by OJK; or
b. in an organization or company or other business entity in the event that the concurrent
position creates a conflict of interest that affects the effectiveness of supervision based
on OJK's assessment.

Appointment of Directors and Commissioners

1) Candidates for members of the Board of Directors and candidates for members of the
Board of Commissioners must obtain OJK approval before carrying out their actions, duties
and functions in their positions,
2) BPR holds Shareholders General Meeting (SGM) appointment no later than 60 working days
from the date of OJK approval.
3) In the event that the BPR has held SGM before obtaining OJK approval, the BPR may not
hold another SGM to approve the appointment of members of the Board of Directors
and/or members of the Board of Commissioners.
4) BPR is required to report the appointment of members of the Board of Directors and/or
members of the Board of Commissioners online through the OJK reporting system, in the
reporting period closest to the effective date of appointment of members of the Board of
Directors and/or members of the Board of Commissioners accompanied by minutes of the
GMS and proof of receipt of notification from the competent authority .