JAKARTA — Indonesian banks will be required to publish a breakdown of their lending rates, including margins, starting in October under a new regulation as financial authorities look to increase industry competitiveness.

The regulation from Indonesia's Financial Services Authority (OJK), which was issued earlier this month, is intended to boost lending growth and ensure borrowers are not overcharged.

"The rule is to encourage the efficiency of banks in setting their interest rates in order to support the financing of the economy," the OJK said in a statement issued late on Monday.

Last year, President Joko Widodo had criticized banks for setting their margins too high as it would hamper lending growth to businesses in Southeast Asia's largest economy.

The net interest margin (NIM) for Indonesian banks was 4.79 percent in the second quarter of 2023, the highest among its peers in Southeast Asia, according to a Fitch Ratings' report. The OJK said the NIM was 4.57 percent as of June this year.

Based on the new rule, a bank must update clients every time it changes its prime lending rate, and that notice will include details of its cost of funds, overhead costs and margin used to calculate the rate.

The regulation also requires lenders to report to the OJK each month an estimate of the risk premium they are charging customers.

Sanctions include fines of up to 15 billion rupiah ($970,000) for inaccurate information about rates.

Indonesia's biggest lender, Bank Central Asia, told Reuters it will try to maintain lending rates at a level that is acceptable to the market. State lender Bank Mandiri said its rates will depend on liquidity, business development strategies and external conditions.