BII, penny wise pound stupid

Commercial banks exist solely to make profit and do that through making interest and fixed income. They absorb depositors' monies by providing interest and channel the funds to third parties at higher rates, in the hope of gaining some margin counted at future value through the resulting interest differentials.

In attempts to remain competitive, banks must be attractive enough to would-be depositors or lenders by offering as attractive interest rates as possible, and to existing customers by better service delivery or provision of incentives. We also know that most banks try to make additional income by offering services for fixed fees, such as through services of inter-bank transfers, payment settlements, forex buy-sell, cellular vouchers, et cetera.

Still, with the above understanding in mind, I'm afraid that Bank International Indonesia (BII) is making a gross mistake by doing what it is doing nowadays. In fact, I think it is being ridiculously penny wise but pound stupid in its attempt to increase fixed income.

Yesterday I checked my balance at one of its ATMs down the office building and withdrew some cash. Minutes later I read a notice saying that this bank is starting imposing that BII savers must pay Rp 5,000 for transfers to other BII accounts and Rp 2500 for checking the balance at any BII ATM, unless they have balance bigger than Rp 5 million rups (US$ 550)!

Of course, banks are no moral institutions. Appealing that most Indonesian banks are actually indebted to the majority of the people would be like straightening a wet thread. But it is a naked fact that we civilians have been paying the burden of the banking restructuring since the 1998 crisis, and that our grandchildren will also have to chip in for the salvation.

Equally, saying that BII is being evilish is as out of the question; still, the fact remains that it is outrageously ripping the majority of its savers off their money.

When this issue was brought up this morning among colleagues and the office financier, I knew I wasn't the only guy turning mad.