Banking Institutions in Indonesia
Indonesian banking in carrying out its functions is based on the principle of prudence. The main function of Indonesian banking is as a collector and distributor of public funds and aims to support the implementation of national development in order to increase equity, economic growth, and national stability towards improving the welfare of the people.
Based on the law, the banking structure in Indonesia consists of commercial banks and Bank Perekonomian Rakyat (BPR, or Rural Bank). The main differences between commercial banks and BPR are that they cannot accept deposits in the form of demand deposits, cannot conduct business activities in foreign exchange (except for foreign exchange business activities), and have a limited range of operational activities.
Definition
Bank is a business entity which collects funds from the public in the form of savings and distribute it to the public in the form of credits and or other forms within the framework of improving the living standard of the public at large.
Conventional Bank is a Bank that carries out business activities conventionally and based on its type consists of Conventional Commercial Banks and Conventional Rural Bank (Bank Perekonomian Rakyat).
Conventional Commercial Bank is a Bank that carries out business activities conventionally which in its activities provide services in payment flow.
Conventional Rural (Bank Perekonomian Rakyat Konvensional/BPR) is a Bank that carry out business activities conventionally and which in its activities do not directly provide services in demand deposit flow.
Sharia Bank is a Bank that carries out business activities based on Sharia Principles and according to its type consists of Sharia Commercial Bank (BUS) and Sharia Rural Bank (BPRS).
Sharia Commercial Bank is a type of Sharia Bank which in its activities provide services in payment flow.
Sharia Rural Bank (Bank Perekonomian Rakyat Syariah/Sharia BPR) is a type of Sharia Bank which in its activities does not provide services in direct payment flow.
Sharia Business Unit (UUS) is a work unit at a head office of a Conventional Commercial Bank which has the function as the parent office of offices or units that operate business activities based on Sharia Principles or a work unit at a branch office of a Bank domiciled abroad which conducts business activities conventionally and has the function as the parent office of sharia sub-branch offices and/or sharia units.
Sharia Principles are the principles of Islamic law based on fatwas and/or sharia conformity statements issued by the institution that has the authority to establish fatwas in the sharia sector.
