A Brief History of Bank Indonesia as a Central Bank

Bank Indonesia (Source image: wikimedia.org)

Long before the arrival of western nations, the archipelago had become the center of international trade. While in mainland Europe, mercantilism had developed into an industrial revolution and led to the rapid rise of European trade activities. At that time simple banking institutions emerged, such as Bank van Leening in the Netherlands. This banking system was then brought by western nations who expanded the archipelago at the same time. The VOC in Java in 1746 established De Bank van Leening which later became De Bank Couranten Bank van Leening in 1752. The bank was the first bank born in the archipelago, the forerunner of the world of banking in the future. On January 24, 1828, the Dutch East Indies government established a circulation bank called De Javasche Bank (DJB). For decades the bank operated and developed based on an octroi from the ruler of the Kingdom of the Netherlands, until finally promulgated by DJB et 1922.

The period of Japanese occupation temporarily stopped DJB and Indies banking activities. Then the period of the revolution arrived, the Dutch East Indies experienced a dualism of power, between the Republic of Indonesia (RI) and the Nederlandsche Indische Civil Administrative (NICA). Banking is also divided into two, DJB and Dutch banks in the NICA region while "Bank Indonesia Collections" and Bank Negara Indonesia in the Republic of Indonesia. The 1949 KMB Round Table Conference ended the conflict between Indonesia and the Netherlands, then DJB as the central bank of the Republic of Indonesia (RIS), this status continued until the period of the Republic of Indonesia's return to the unitary state. Next, as a sovereign nation and state, the Republic of Indonesia nationalized its central bank. Therefore, since July 1, 1953, DJB became Bank Indonesia, the central bank of the Republic of Indonesia.

The Round Table Conference (KMB) which took place in The Hague, the Netherlands in 1949, may be said to be a milestone in the birth of a sental bank in Indonesia. One of the important decisions of KMB was to appoint De Javasche Bank NV as the central bank. De Javasche Bank is a commercial and circulation bank (bank of issueing money) belonging to the Dutch East Indies colonial government which had been established since 1828. Meanwhile history records also that since 1946, Bank Negara Indonesia, the first bank established by the government of the Republic of Indonesia, has also determined as the central bank. However, in the KMB it was also decided that Bank Negara Indonesia, which was established in 1946, was entrusted with the role of a development bank.

Although De Javasche Bank was agreed upon and decided jointly by the Indonesian government and the Dutch government as a central bank, the important influence of colonialism in determining policy was still strong. De Javasche Bank's position then became a dilemma because a country has a central bank that is still under the influence of other interests.

The agreement on the appointment of De Javasche Bank as a central bank between the Dutch Government and the Indonesian Government did not just happen. Apart from political reasons, another reason for this appointment is because De Javasche Bank has operated and functioned as a circulation bank in Indonesia since 1828. It can be said that De Javasche Bank is a commercial bank that also functions as the oldest circulation bank in Southeast Asia. The bank's operation was based on the first Octrooi given by the Government to De Javasche Bank in 1827. This bank was the first bank to carry out the functions of a central bank, namely as a circulation bank. The establishment of De Javasche Bank was basically intended by the Dutch Indies Government as an extension of De Nederlandche Bank to obtain the task as a circulation bank and to finance large Dutch companies operating in the Indies.

Based on the first Octrooi which took effect from January 1, 1828 to December 31, 1837, De Javasche Bank was granted a monopoly in issuing banknotes and functioning as a circulation bank. On the other hand, De Javasche Bank is also engaged in the commercial sector by accepting deposits, giving credit, accepting notes, and buying and selling gold and silver bars.

Source: Book 
Didik J. Rachbini, Suwidi Tono dkk, Bank Indonesia Menuju Independensi Bank Sentral, Jakarta: PT.Mandi Mulyo, 2000
Djoni S. Gazali dan Rachmadi Usman, Hukum Perbankan, Jakarta: Sinar Grafika, 2012

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