JAKARTA, March 23 (Reuters) - Indonesia's central bank on Thursday issued new regulations for the trading of negotiable deposit certificates (NCDs) in a bid to get more financial institutions to tap into the market.
Policymakers want to boost the trading of NCDs to reduce the tendency of Indonesian banks to park excess funds at the central bank.
Only 5 billion of the 20.25 trillion rupiah ($1.52 billion) worth of outstanding NCDs were traded, according to the central bank, as legal uncertainties and a lack of clear regulations kept financial institutions on the sidelines.
The rules, which will come into effect on July 1, will regulate the approval process for certificate issuers, product criteria, transaction and supervision.
"In order to establish the money market, development of money market instruments that can be transacted is needed, including the certificates of deposit," Bank Indonesia said in a statement.
The central bank hopes an increase in NCD trading would also help support monetary policy transmission by improving the commercial bank rates curve and funding profile.
"BI has an objective of reaching inflation stability by monetary policy transmissions that go through various channels," Nanang Hendarsah, the central bank's head of financial market development department, told reporters.
The central bank plans to also issue a regulation on commercial paper transactions in May to provide further depth to the local financial market, as well as treasury dealer certification rules next month, Hendarsah said.
"We want market practitioners to have technical capabilities, to obey the code of conducts, and follow the rules," he said.
Last year, a central bank deputy governor said that BI managed about 322 trillion rupiah ($24.17 billion) of banks' short-term excess liquidity.
$1 = 13,324 rupiah Reporting by Hidayat Setiaji and Fransiska Nangoy; Editing by Randy Fabi