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Bank Indonesia governor Darmin Nasution may have the right intentions, but his move to set a ceiling on the interest rates credit-card companies can charge is a bad one.

Under the Bank Indonesia regulation on electronic card payment devices that is being finalized and will be issued before the end of the year, the central bank also intends to limit the number of cards one person can have. Again, we question the reasoning behind this decision.

The governor said some credit-card issuers applied interest rates of 3.5 percent to 3.75 percent monthly. This equals in excess of 40 percent, or more than three times the prime lending rate of 12 percent a year.

While this is high, it is no different to what is practiced in other markets. Instead of regulating the interest rate, BI should force credit-card companies to be transparent in their fees and interest rates. This way consumers can make informed decisions.

The same principle applies to the number of credit cards a person is allowed to carry. BI should instead set guidelines on the size of the bad debt each bank is allowed to accrue from a customer. It should let the market decide and allow banks to manage their credit-card business as they see fit.

There is a real danger that the central bank might hurt consumer sentiment with its latest regulation. Given that consumer spending has been one of the pillars of domestic growth, that will impact the entire economy. It is critical that such policy moves are carefully deliberated before being implemented.

One aspect of the new regulation is positive, though. That is the obligation on banks to continuously update customer data such as income and spending habits. This will enable them to keep tract of spending patterns and thus manage their credit-card business more prudently.

We fully support BI’s desire to ensure that individuals do not spend beyond their means. Rising credit-card defaults would be bad for the economy and bad for the banks. But limiting the number of cards a person can carry is not the right way to address this potential hazard.