Indonesia's banking future: Expansion, consolidation and MSME growth

The 2026 Financial Services Omnibus Law introduces changes that could reshape the Indonesian banking landscape in three key areas: expansion of permissible business activities, a statutory mandate for bank consolidation and a broadened framework for writing off non-performing debts owed by micro, small, and medium enterprises (MSMEs). Below, we highlight what market participants should know.

Broader business activities paving the way for universal banking

The 2026 Financial Services Omnibus Law amends the business activities available to conventional commercial banks (bank umum) and Islamic commercial banks (bank umum syariah) (together, banks), permitting them to conduct other financial services activities, subject to the potential impact of these activities on the stability of Indonesia's financial system. The provisions are open-ended and non-exhaustive, leaving further details for the Indonesian Financial Services Authority (OJK) to regulate and Indonesia’s House of Representatives (DPR) to approve.

In addition to the overarching objectives of modernising Indonesian banks and generally improving their competitiveness and efficiency, the context for this expansion may be Indonesia's new international financial centre (Pusat Finansial Internasional Indonesia – PFII).¹

Bank consolidation roadmap

The 2026 Financial Services Omnibus Law also introduces a statutory mandate for OJK to prepare and maintain a dedicated consolidation roadmap for banks, with the stated objective of strengthening the structure, competitiveness and resilience of the national banking sector. The provisions are brief and open-ended, as they do not prescribe specific targets, timelines or consolidation mechanisms, effectively leaving all substantive detail to OJK's implementing regulations.

These roadmaps are not entirely new. OJK had previously published the Indonesian Banking Development Roadmap (Roadmap Pengembangan Perbankan Indonesia)² and the Indonesian Syariah Banking Development and Strengthening Roadmap (Roadmap Pengembangan dan Penguatan Perbankan Syariah Indonesia)³. Moreover, back in 2020, OJK put in place a dedicated consolidation regulation (OJK Regulation No. 12/POJK.03/2020) requiring every bank to maintain minimum core capital of at least IDR 3 trillion, providing incentives for parties that undergo consolidation, and setting out the permitted consolidation methods (ie merger, consolidation, integration, or establishing a banking business group).

The significance of the 2026 Financial Services Omnibus Law is that it elevates the consolidation roadmap from a policy document to a statutory obligation, requiring OJK to maintain a formal, dedicated roadmap. The key question for market participants is whether this will prompt OJK to go further than its existing framework by introducing stronger prescriptive targets, timelines or incentives (including fiscal incentives). That should become clearer once the implementing regulations are published.

Broader scope for MSME debt write-offs

The 2026 Financial Services Omnibus Law revises the framework established under the 2023 Financial Services Omnibus Law for writing off eligible non-performing debts owed by MSMEs to state-owned (BUMN) banks and non-bank financial institutions. Recognising the importance of MSMEs to the Indonesian economy, the framework is intended to help MSMEs regain access to formal financing while providing legal certainty for BUMN banks and non-bank financial institutions in carrying out write-offs.

The key changes introduced by the revised framework include:

• Applicability to regional government-owned (BUMD) banks and non-bank financial institutions, which are now also eligible to carry out write-offs.
• Relaxed requirements for book write-offs (hapus buku). Under the 2023 Financial Services Omnibus Law, lenders were required to have first exhausted collection efforts and restructuring attempts. The 2026 Financial Services Omnibus Law removes those specific prerequisites and instead requires only that write-offs be carried out with due regard to prudential principles.
• Personal liability protection for the lender's commissioners. Under the 2023 Financial Services Omnibus Law, this protection was afforded only to directors.
• New record-keeping requirements. Lenders must properly document and record the write-off process and retain records for at least ten years. Where a claim is written off (hapus tagih), the lender must also update the debtor's data in OJK's financial information system (SLIK) to record the debt as settled. These requirements previously appeared in Government Regulation No. 47 of 2024 and are now incorporated directly into the 2026 Financial Services Omnibus Law.

Notably, the 2026 Financial Services Omnibus Law continues to treat losses arising from write-offs as losses of the relevant lender, rather than state financial losses – provided that the write-offs are carried out in good faith and in accordance with applicable laws and regulations, the lender’s constitutional documents, and good corporate governance principles.

What to expect

Market participants should look out for further laws and implementing regulations concerning PFII, bank business expansion, the bank consolidation roadmap, and the revised MSME write-off framework.

The new law on PFII is expected to be available soon, now that the DPR has approved it. Meanwhile, the 2026 Financial Services Omnibus Law does not prescribe any deadline for OJK's implementing regulations.

As the implementing regulations take shape, market participants will likely be looking at several key areas of interest:

• whether PFII is relevant to the bank business expansion provisions;
• which new financial services activities conventional and sharia banks will be permitted to undertake, and how that expansion of business activities will be phased in;
• whether the expansion will be applied uniformly across all bank categories or be tiered by bank size;
• whether the consolidation roadmap will set express targets and timelines;
• whether OJK and other regulators will introduce incentives to encourage voluntary consolidation, potentially including fiscal incentives, which would require coordination with the Ministry of Finance; and
• how the general prudential principles requirement for MSME debt write-offs will be implemented.

This bulletin is part of a series of legal updates on the 2026 Financial Services Omnibus Law. Please contact us if you have any questions about the implications of these changes for your business.

Footnotes:

¹ Media reports indicate that OJK has been exploring implementation of 'universal banking' within PFII by, for instance, enabling banks to conduct investment banking activities and issue insurance policies. In Indonesia, such activities are currently only carried out by securities companies and insurance companies, respectively. It remains to be seen whether these reports on universal banking are relevant, and if so, whether this will be limited to those operating within PFII.

² https://ojk.go.id/id/Publikasi/Roadmap-dan-Pedoman/Perbankan/Pages/Roadmap-Pengembangan-Perbankan-Indonesia-2020-2025.aspx

³ https://ojk.go.id/en/berita-dan-kegiatan/info-terkini/Documents/Pages/Roadmap-for-the-Development-and-Strengthening-of-Indonesian-Islamic-Banking-2023-2027/Roadmap%20for%20the%20Development%20and%20Strengthening%20of%20Indonesian%20Islamic%20Banking%202023-2027.pdf