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Bank Indonesia said on Thursday it would launch a new minimum reserves requirement for banks next month in a bid to boost lending and accelerate economic growth.

“I hope the new regulation can be issued next month,” said Bank Indonesia deputy governor Muliaman D Hadad.

He explained that the new minimum reserves requirement would be linked to banks’ loan-to-deposit ratio and that banks that fail to meet the central bank’s LDR threshold will be forced to increase their reserves held at Bank Indonesia.

Gatot Suwondo, president director of PT Bank Negara Indonesia, the country’s fourth-largest bank by assets, has said he is not happy with the central bank’s plan, arguing that the relatively lower LDR level was due to the lingering risks faced by banks in boosting loans.

Banks are currently required to set aside 5 percent of their third-party funds as reserves held by the central bank. Muliaman declined to provide details about the new plan, including what the central bank’s desired LDR level is.

But he said recently that the ideal LDR level for banks should be between 75 percent and 80 percent to ensure banks lend more money to the corporate sector and meet the central bank’s higher lending growth target of 18 percent to 20 percent this year. Lending growth last year was only 10.7 percent, below the central bank’s target of 15 percent.

It has been trying hard to push banks to increase lending over the last couple of years but has been relatively unsuccessful. Banks have instead invested much of their money in secure Bank Indonesia notes (SBI), with bankers saying that lending to the corporate sector remained risky in the wake of the global downturn.

The minimum reserves requirement is normally used by the central bank as a monetary tool to help control inflation, but in some cases it can also be used as an unconventional measure to drive lending growth.

In 2005, the central bank resorted to similar measures, linking the reserves requirement to LDR in a move designed to stimulate lending.

Meanwhile, the central bank said it was mulling a request from bankers to allow them to include corporate bond holdings in their lending figures when making the LDR calculation.

“We are considering to allows bond in the LDR calculation,” said Halim Alamsyah, director for research and regulation at the central bank. “But if bonds are to be allowed in the LDR calculation, they should have good ratings, meaning they are marketable.”