Most Indonesians are familiar with banks that carry out activities such as collecting funds, transferring funds, and providing other banking services. In Indonesia, the types of banks that operate can be grouped based on their function, operation, ownership, and status.  

Here is the summary: 

What is a bank? 

Based on Act Number 10 of 1998 on banking, a bank is a business entity that collects funds from the public in the form of savings and distributes them to the community in the form of credit and or others to improve people’s standard of living. Its activities can be categorized into main activities and supporting activities. 

The main activities of the banks are collecting and distributing funds. Meanwhile, the supporting activities are in the form of services provided to support the primary activities seamlessly. 

Fundraising activities include collecting funds from the public in the form of current account deposits, savings, and time deposits. Distributing funds activities can be in the form of providing loans to the community. Meanwhile, service activities can be in the form of bill deposit services such as (electricity bills, telephone, water, or education fees), payment services (salaries, pensions, or gifts), money transfer services (transfers), and many more. 

Types of Banks in Indonesia 

The Act of banking split banks based on their function into three, namely Central Banks, Commercial Banks, and Rural Banks. However, in practice, we can also group banks based on their operations (Conventional and Sharia), ownership (Government, Private, Foreign, and Mixed), and status (Foreign Exchange and Non-Foreign Exchange). 

Banks by function: 

  • Central Bank: The bank responsible for domestic monetary policy to maintain price stability and the value of the nation’s currency. The central bank also has an obligation to regulate and supervise other banks to limit the risks and costs of a systemic crisis. The Central Bank in Indonesia is Bank Indonesia. 
  • Commercial Banks: A bank that conducts business conventionally and/or according to Sharia principles, with activities that include payment services. Commercial banks are the banks we most often use to save. 
  • Rural Banks: A bank that operates conventionally or according on Sharia principles, but does not provide payment transfer services. In short, BPRs do not accept deposits like checking account deposits, foreign exchange activities, and insurance. 

Banks based on their operations: 

Conventional Banks: Banks that perform traditional business activities using the pricing method according to the interest rate issued by Bank Indonesia. Banks such as Bank Mandiri, Bank BRI, BNI, BTN, and so on. 

Sharia Bank: A Bank that carries out business activities based on sharia principles in the Islamic religion. Act Number 21 of 2008 Concerning Islamic Banking. Examples include Bank Syariah Indonesia and others. 

Banks by ownership: 

Government Banks: Bank ownership, all or partially, is owned by the government and is usually referred to as a BUMN Bank (State-Owned Enterprise). Examples of government banks are Bank Mandiri, BRI, BNI, and BTN. In addition to the central government, local governments can also have local government banks. Examples of it are Bank Jatim, Bank NTB, and others. 

National Private Bank: Bank ownership, all or partially, is owned by private parties or entrepreneurs from Indonesia. Examples include BCA, Maspion Bank, Ganesha Bank, and many more. 

Foreign Banks are those that are owned by foreign parties and have branches in countries other than their own. Examples of foreign banks in Indonesia are ICBC Indonesia, HSBC, Bank of America, Standard Chartered, etc. 

Joint Venture Banks: A bank formed by a legal entity in Indonesia and a legal entity in another country. For example, Bank CIMB Niaga. 

Bank berdasarkan statusnya: 

Foreign Exchange Bank: Banks that can carry out foreign transactions and other activities related to foreign currencies. Usually, foreign exchange banks have featured products such as foreign exchange or foreign currency savings. Examples of foreign exchange banks are Bank Mandiri, BRI, Bank BTN, Bank Ganesha, etc. 

Non-Foreign Exchange Banks: Banks that can perform foreign transaction activities within a limited area in certain countries. Examples of non-foreign exchange banks are Bank Yudha Bakti, Bank Harda Internasional, and others. 

Bank Transformation amid Technological Innovation 

Banks are the world’s oldest financial institutions, and they are difficult to disrupt. However, now they are also required to transform towards digital when the advance of technological innovation becomes faster. The well-known types of banks so far might be added again in the future. 

In line with the transformation taking place in the banking sector, an innovation service is also emerging and becoming a topic of discussion. This innovation is known as digital banking. 

According to OJK, a digital bank is an Indonesian Legal Entity Bank (BHI) that provides and carries out business activities primarily through electronic channels without a physical office other than the head office or using limited physical offices. An example is PT Bank Rakyat Indonesia Agroniaga Tbk, which on 28 September changed its name to PT Bank Raya Indonesia Tbk and officially changed its business model to a digital bank. 

Given the extensive growth opportunities, the transformation towards digital banking in Indonesia will also continue. In this new paradigm, banks in Indonesia must move quickly to attract new customers and maintain the loyalty of existing customers. 

However, keep in mind that orchestrating a thriving financial ecosystem requires strong collaboration. Banks, other financial industry players, including the government, must work together to provide value to consumers, which will bring better economic value and financial inclusion.