On 4 June 2026, the Financial Services Authority (Otoritas Jasa Keuangan or “OJK”) issued POJK No. 7/2026*, which took effect on 30 June 2026. The regulation replaces POJK No. 5/2015**, although the implementing provisions issued under the previous regulation remain effective to the extent that they do not conflict with POJK No. 7/2026.
POJK No. 7/2026 retains the principal quantitative capital requirements applicable to rural banks (bank perekonomian rakyat or “BPR”). A BPR must maintain a minimum capital adequacy ratio (Kewajiban Penyediaan Modal Minimum or “KPMM”) of 12% of risk-weighted assets (Aset Tertimbang Menurut Risiko or “ATMR”), core capital of at least 8% of ATMR, and minimum core capital of IDR6 billion. Against those thresholds, the new regulation introduces a more rigorous approach to the quality and recognition of capital, the consequences of capital shortfalls, and the treatment of BPRs that were already undercapitalised when the regulation took effect.
This article highlights selected changes introduced under the new framework and does not address every provision of POJK No. 7/2026.
- New Capital Deduction Factors
One of the principal substantive changes concerns the items deducted in calculating primary core capital (modal inti utama). POJK No. 7/2026 retains existing deduction items such as deferred tax calculations, goodwill, disagio, accumulated losses, current-year losses, and foreclosed collateral (agunan yang diambil alih or “AYDA”) after more than one year has elapsed since its acquisition. It also introduces two additional deduction factors: (i) abandoned property (properti terbengkalai) after more than one year has elapsed since the property was designated as abandoned; and (ii) any shortfall between the asset quality allowance (Penyisihan Penilaian Kualitas Aset or “PPKA”) and the impairment loss allowance (Cadangan Kerugian Penurunan Nilai or “CKPN”) for productive assets.These additions may directly reduce the amount of capital recognised for regulatory purposes. BPRs should therefore review not only their headline capital figures but also the classification of abandoned property and the reconciliation between their PPKA and CKPN calculations. - Recast Sanctions and Mandatory Public Disclosure
POJK No. 7/2026 recasts the administrative sanctions applicable to a BPR that fails to comply with the IDR6 billion minimum core capital requirement or the applicable capital-restoration obligation. The sanctions may comprise: (i) temporary suspension of certain operational activities; (ii) prohibition on business expansion; (iii) downgrading of the BPR’s soundness rating; (iv) prohibition on raising new funds and extending new funds; (v) prohibition on profit distributions; and (vi) restrictions on allowances or equivalent facilities provided to members of the board of directors and board of commissioners, or on remuneration paid to executive officers.A BPR may be exempted from these sanctions in specified circumstances, including where the relevant review of a proposed merger, consolidation or acquisition permits the transaction to proceed, and/or where a qualifying capital injection results in the minimum core capital requirement being satisfied. The regulation also introduces a specific public-announcement obligation. This obligation does not apply to every sanction listed above. It applies where OJK imposes: (i) a temporary suspension of certain operational activities; (ii) a prohibition on business expansion; or (iii) a prohibition on raising new funds and extending new funds.The BPR must announce the relevant sanction in a place at its office that is readily visible to the public and on its website within five business days from the date of OJK’s sanction letter. Within the same period, the BPR must submit evidence of the announcement to OJK electronically as an incidental report. This requirement adds a direct reputational and disclosure dimension to capital-related enforcement. - Transitional Treatment for BPRs Below the Minimum Core Capital Requirement
The transitional provisions distinguish between two categories of undercapitalised BPRs. A BPR that had never met the IDR6 billion minimum core capital requirement before POJK No. 7/2026 took effect became subject to the administrative sanctions prescribed under the new framework upon the regulation’s effectiveness.By contrast, a BPR that had previously met the IDR6 billion requirement but whose core capital had fallen below that amount before POJK No. 7/2026 took effect must restore its core capital within six months from: (i) the monthly periodic report submitted to OJK showing the shortfall; or (ii) the date of the minutes of an OJK examination showing the shortfall.Failure to restore the minimum core capital by the applicable deadline will result in the BPR becoming subject to the administrative sanctions under Article 17(1) of POJK No. 7/2026.
For BPRs and their shareholders, the practical significance of POJK No. 7/2026 extends beyond maintaining the prescribed headline capital amount. Capital planning must also take account of the regulatory recognition of individual capital components, the treatment of abandoned property and provisioning shortfalls, the applicable restoration timeline, and the possibility that certain sanctions may have to be publicly disclosed.
*OJK Regulation No. 7 of 2026 on the Minimum Capital Adequacy Requirement and Fulfilment of Minimum Core Capital for Rural Banks (the “POJK No. 7/2026”)
**OJK Regulation No. 5/POJK.03/2015 on the Minimum Capital Adequacy Requirement and Fulfilment of Minimum Core Capital for Rural Banks (the “POJK No. 5/2015”)