Jurisdiction - Indonesia
Indonesia – Bank Regulation Implements Mandatory Use Of Rupiah.

7 May, 2015




In June 2011, Law of the Republic of Indonesia No. 7 of 2011 on Currency (the “Currency Law”) was passed with the view to upholding the dignity of the national currency and to build worldwide confidence in the Rupiah. The Currency Law stipulates, amongst other things, the mandatory use of Rupiah for all transactions conducted within Indonesia with immediate effect, with certain exceptions.

Key Provisions Under The Currency Law

Requirement To Use Rupiah Within Indonesia

The Currency Law requires the use of Rupiah for all transactions settled and conducted within the territory of Republic of Indonesia. Article 21 of the Currency Law stipulates that the Rupiah must be used for the following purposes:

(a) payment transactions;
(b) the settlement of other obligations that must be discharged using money; and/or
(c) other financial transactions,

conducted within the territory of the Republic of Indonesia, save for:

(i) transactions related to the national budget;
(ii) grants/donations given by or to a foreign party;
(iii) international commercial transactions;
(iv) bank deposits denominated in foreign currency; and
(v) international financing transactions,

(the “Exceptions”).

The legislation is primarily a domestic one regulating transactions that take place and are settled in Indonesia. For foreign entities, broadly speaking, the Currency Law affects those with a presence in Indonesia which conduct transactions within the jurisdiction. Parties who wish to use foreign currencies must ensure that the transaction is not performed in Indonesia or that it falls within one of the Exceptions in Article 21(2).


Of greatest interest to businesses generally are the Exceptions set out in Article 21(2)(c) and (e) relating to “international commercial transactions” and “international financing transactions” (collectively, the “International Transaction Exceptions”). As these International Transaction Exceptions are worded very broadly, uncertainty had arisen as to how such International Transaction Exceptions are to be circumscribed.
Exception (c): International Commercial Transactions

This Exception suggests that payments made by or to overseas counterparts will be exempt from the ambit of the legislation. However, the question arises as to what “international” exactly means. Should it be construed as applying to a transaction between an Indonesian company and the Indonesian branch office of a foreign-based company, even though the goods and services involved are provided entirely within Indonesia? Further, does the Currency Law affect a multinational company that operates a permanent business establishment in Indonesia? The market has conceded that without guidance on the definition of “international” in the legislation, it will be necessary to determine this on a case-by-case basis.

Exception (e): International Financing Transactions

This Exception suggests that loans extended by an Indonesian lender to an overseas borrower, and vice versa, could be denominated in foreign currency. It will also not affect the ability of Indonesian corporations to issue or trade in foreign currency-denominated financial instruments as part of the international financial system.

However, the question arises as to whether a foreign currency-denominated loan extended by the local office of the commercial lending arm of a foreign government or international organisation would be exempt from the legislation. There is also doubt as to whether domestic trading of financial instruments where they are issued by an Indonesian corporation to a foreign corporation would fall under this Exception.

Regulation Implementing The Currency Law

On 17 March 2015, Regulation No. 17/3/PBI/2015 on Mandatory Use of Rupiah Currency in Indonesia’s Territory (the “March 2015 Regulation”) was issued by Bank Indonesia (“BI”). In essence, the March 2015 Regulation clarifies some of the interpretational issues of the Currency Law and provides further elaboration on the transactions to which the Currency Law may apply. It also establishes additional exceptions beyond those set out in the Currency Law.

The March 2015 Regulation has come into effect on 31 March 2015 for cash transactions. The effective date for the provisions in respect of non-cash transactions is 1 July 2015.

Elaboration On The International Transaction Exceptions

Article 8(1) of the March 2015 Regulation, explains that the “international commercial transactions” Exception covers:

(a) import/export of goods out of or into the customs territory of the Republic of Indonesia; and/or

(b) cross-border trade transactions in the form of:

(i) cross-border supply of goods, such as goods purchased online from another country; and
(ii) cross-border supply of services (referred to as “consumption abroad”), such as payments for services provided in another country, as in the case of an Indonesian studying or receiving medical treatment abroad.

Article 8(2) of the March 2015 Regulation makes it clear that this Exception does not apply to the payment of ancillary expenses incurred in Indonesia, such as port fees, airport handling charges, transportation costs, etc., related to the import/export of goods. In other words, these expenses must be denominated in Rupiah.

As regards the “international financing transactions” Exception, Article 9 of the March 2015 Regulation clarifies that a financing transaction conducted with a foreign party (in the capacity of provider or recipient of the financing) who is domiciled abroad will be exempted from the obligation to use the Rupiah.

Applicability To Cash And Non-Cash Transactions

The March 2015 Regulation also clarifies that the Currency Law’s provisions on use of Rupiah apply to both cash and non-cash transactions. Non-cash transactions include the use of checks, giro slips, credit cards, debit cards, ATM cards and electronic money, which involve:


(a) payment transactions;
(b) other settlement of obligations that must be fulfilled on money terms; and/or
(c) other financial transactions.

To further boost the use of Rupiah, Article 11 of the March 2015 Regulation states that the prices of goods and services may only be stated in the national currency.

Other Exceptions Under The March 2015 Regulation

Articles 4 and 5 of the March 2015 Regulation provide additional exceptions on top of those provided in the Currency Law, namely:

(a) foreign currency commercial operations conducted by a bank in accordance with conventional and shariah banking legislation;

(b) the Article’s Elucidation lists foreign currency-denominated loans for “export and other purposes”, foreign currency interbank money transactions, foreign currency-denominated bonds, foreign currency-denominated sub-debt, the purchase of securities using foreign currency, and other banking transactions conducted in accordance with the conventional and shariah banking legislation. This last element is not explained, but leaves the way open for the list to be expanded by BI in line with developments in the banking sector;

(c) transactions involving foreign currency-denominated Indonesian government securities on primary and secondary markets; and

(d) other foreign currency transactions that are conducted in accordance with law (including the BI Law, Capital Markets law and Indonesia Trade Finance Agency Law).
While the March 2015 Regulation permits Indonesian banks to extend foreign currency-denominated loans to Indonesia-domiciled borrowers for export purposes, it is not very clear whether the Indonesian banks can do the same in respect of loans for other purposes.

Under Article 14 of the March 2015 Regulation, money changers are exempted from the mandatory use of Rupiah, as is the carrying of cash into and out of Indonesia (subject to a limit of Rp 100 million (or the foreign currency equivalent) under the Anti Money-Laundering Act of 2010, and BI and Ministry of Finance regulations).

In addition, Article 16 of the March 2015 Regulation gives BI leeway to grant exemptions to businesses with specific characteristics, having regard to their preparedness to use Rupiah, business continuity and economic exigencies.

Prohibition On Rejecting Settlement In Rupiah

Article 23 of the Currency Law prohibits the rejection of Rupiah for payment or settlement purposes within the territory of the Republic of Indonesia. Exceptions to this prohibition apply if:

(a) there are doubts as to the genuineness of the proferred currency, or

(b) the use of foreign currency has been previously agreed upon in writing for payment or settlement of an obligation (the “Written Agreement Exemption”).

Article 10 of the March 2015 Regulation clarifies that the Written Agreement Exemption is only available in the case of:

(a) any of the Exceptions described above (as supplemented by Articles 4, 5, 8 and 9 of the March 2015 Regulation); and
(b) strategic infrastructure projects, where the approval of BI for an exemption has been secured.



The March 2015 Regulation contains strict penal and administrative sanctions for non-compliance. On the penal side, breaches of the obligation to use Rupiah and to accept Rupiah in payment are punishable with imprisonment of up to one year and a fine of not more than IND 200m.

As for a failure to use the Rupiah in non-cash transactions, the March 2015 Regulation imposes administrative sanctions in the form of a fine of up to IND 1bn and a ban on participating in the foreign currency payment system.

Rather less draconian, a failure to list prices in Rupiah will only result in an administrative warning. In all cases, BI may recommend to the authorities that enforcement action be taken, such as the revocation of business licenses or the freezing of business operations.

Concluding Words

Domestic businesses as well as foreign parties with investments in Indonesia may have to make some contractual adjustments to their transactions and obligations thereunder, so as to comply with the Currency Law and the March 2015 Regulation.

The March 2015 Regulation makes it clear that the use of Rupiah is compulsory in Indonesia for payment and settlement purposes, other than as exempted. However, some uncertainty remains as to how the March 2015 Regulation will be enforced in practice, as well as whether, in less straightforward situations, the International Transaction Exceptions apply. The business community is grappling with the extent and scope of the Law of the Republic of Indonesia No. 7 of 2011 on Currency and the March 2015 Regulation, and clarifications are currently being sought from BI.


Rajah & Tann


For further information, please contact:


Yoke Ping Cheng, Partner, Rajah & Tann

[email protected] 


Benjamin Tay, Partner, Rajah & Tann
[email protected]


Banking & Finance Law Firms in Indonesia 

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