FILE PHOTO: Indonesia's newly appointed Finance Minister Purbaya Yudhi Sadewa speaks to journalists after his inauguration at the Presidential Palace in Jakarta, Indonesia, September 8, 2025. REUTERS/Willy Kurniawan/File Photo

JAKARTA (Reuters) - Indonesia's state-controlled banks must use 200 trillion rupiah ($12.2 billion) in new government funding for lending, and not to buy bonds, Finance Minister Purbaya Yudhi Sadewa said on Friday, as the government takes steps to boost credit growth.

The liquidity injection for state banks is the minister's first major move since he took office on Monday with promises to boost annual economic growth, which has hovered at about 5% since after the COVID-19 pandemic.

He has said growth of between 6% and 7% is achievable for Southeast Asia's largest economy, and has described President Prabowo Subianto's 8% target as "not impossible".

Purbaya is moving some of the cash the government keeps at the central bank to commercial banks in a bid to spur credit expansion, as a way to stimulate economic growth.

"The goal (of this measure) is to ensure it flows to the real sectors," he told a press conference, saying the step aimed to tackle what he has called a "dry" banking system.

In a decree issued on Friday, Purbaya ordered that the funds in state banks be put into a "deposit on call" instrument for six months, but could be extended, at a rate equivalent to around 80.5% of the central bank's policy rate - which is currently 5%.

State lenders currently offer interest rates of between 2.5% and 5% for a six-month term deposit in rupiah.

Despite the maturity mentioned in the decree, Purbaya said putting the money in a deposit on call means the government could withdraw money any time it needs to fund operations.

He also said the remaining excess cash the government holds at the central bank would be sufficient to fund its needs until the end of the year.

Three of the biggest state-controlled lenders - Bank Mandiri, Bank Negara Indonesia and Bank Rakyat Indonesia - would each get 55 trillion rupiah, while Bank Tabungan Negara would receive 25 trillion, and Bank Syariah Indonesia 10 trillion, according to the decree.

Despite the short duration of the deposit, Brian Lee, an economist with Malaysia-headquartered lender Maybank, said there might be an understanding between the government and the banks that the funds would be rolled over if they are used for loans.

"The government is likely banking on the money multiplier, or the concept that as the extra funds are lent out and cycled through the fractional reserve banking system, the boost to money supply would comfortably exceed the initial (cash) injection," said Lee, underlining that Purbaya has said he might top up the fund injection.

The banks will have to sign a partnership agreement with the ministry's treasury department, which will cover rules about how the funds are used, the decree said. They will also have to tell the department every month how the funds are being used.

($1 = 16,385 rupiah)

(Reporting by Stefanno Sulaiman, Ananda Teresia; Editing by Gayatri Suroyo, John Mair and Helen Popper)