Regulation of the Financial Services Authority of the Republic of Indonesia Number 25/POJK.03/2021 concerning the Management of Products of Rural Credit Banks and Sharia Rural Financing Banks

COPY
REGULATION OF THE FINANCIAL SERVICES AUTHORITY OF THE REPUBLIC OF INDONESIA NUMBER 25 /POJK.03/2021 CONCERNING THE MANAGEMENT OF PRODUCTS OF RURAL CREDIT BANKS AND SHARIA RURAL FINANCING BANKS BY THE GRACE OF GOD THE ALMIGHTY, THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY, Considering:
a. that in order to increase the competitiveness of the rural credit bank and sharia rural financing bank industry amidst competition among financial institutions, policies are needed to support industry efforts to innovate and collaborate in providing products to the public; b. that in order to encourage the development of the management of rural credit bank and sharia rural financing bank products that are appropriate to capacity and capability, authority support is needed through responsive and principle-based regulations while still adhering to the principle of prudence and the sharia principle for sharia rural financing banks;
c. that in order to support rural credit banks and sharia rural financing banks in providing products that meet customer needs, acceleration and improvement of product management approvals are required while still prioritizing the principle of prudence and customer protection;
d. that based on the considerations as referred to in letters a, b, and c, it is necessary to establish a Financial Services Authority Regulation concerning the Management of Products of Rural Credit Banks and Sharia Rural Financing Banks; Recalling:

Law Number 7 of 1992 concerning Banking (State Gazette of the Republic of Indonesia Year 1992 Number 31, Supplement to the State Gazette of the Republic of Indonesia Number 3472) as amended by Law Number 10 of 1998 concerning Amendment to Law Number 7 of 1992 concerning Banking (State Gazette of the Republic of Indonesia Year 1998 Number 182, Supplement to the State Gazette of the Republic of Indonesia Number 3790);
Law Number 21 of 2008 concerning Sharia Banking (State Gazette of the Republic of Indonesia Year 2008 Number 94, Supplement to the State Gazette of the Republic of Indonesia Number 4867);
Law Number 21 of 2011 concerning the Financial Services Authority (State Gazette of the Republic of Indonesia Year 2011 Number 111, Supplement to the State Gazette of the Republic of Indonesia Number 5253);
DECIDING:
Establishing: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING THE MANAGEMENT OF PRODUCTS OF RURAL CREDIT BANKS AND SHARIA RURAL FINANCING BANKS.

CHAPTER I
GENERAL PROVISIONS
Article 1
In this Financial Services Authority Regulation, the following terms are defined as:

Rural Credit Bank, hereinafter abbreviated as BPR, is a conventional bank whose activities do not provide payment transaction services.
Sharia Rural Financing Bank, hereinafter abbreviated as BPRS, is a sharia bank whose activities do not provide payment transaction services.
Product is a business activity carried out by BPR or BPRS in the form of product management, services, services, and/or other activities to support the business of BPR or BPRS.
Sharia Principle is the principle of Islamic law in banking activities based on fatwas issued by institutions having authority in setting fatwas in the sharia field.

CHAPTER II
BPR AND BPRS PRODUCTS
Article 2
(1) BPR and BPRS Products are classified into:
a. Basic Products; and b. Advanced Products.
(2) Basic Products as referred to in paragraph (1) letter a consist of products, services, services, and/or other activities to support the business of BPR or BPRS comprising:
a. fund mobilization; b. fund disbursement;
c. fund placement; and/or
d. other basic activities.
(3) Advanced Products as referred to in paragraph (1) letter b consist of products, services, services, and/or other activities to support the business of BPR or BPRS that:
a. are based on information technology; b. are related to the management of activities or products of non-bank financial service institutions or affect the risk profile assessment of BPR or BPRS; and/or
c. require permits and/or approvals from other authorities.
(4) The Financial Services Authority may designate Advanced Products as Basic Products based on certain considerations.

Article 3
(1) In the event that BPR and BPRS Products:
a. have never been managed previously by the respective BPR or BPRS; or b. have been managed previously by the respective BPR or BPRS but involve product development, BPR and BPRS Products are categorized as New Products. (2) BPR and BPRS must include the management of New Products as referred to in paragraph (1) in the BPR and BPRS business plan.

CHAPTER III
PRINCIPLES OF MANAGEMENT OF BPR AND BPRS PRODUCTS
Article 4
BPR and BPRS ensure that the application of risk management and governance over product management is carried out in accordance with Financial Services Authority Regulations concerning the application of risk management and governance applicable to BPR and BPRS.

Article 5
In the management of Advanced Products as referred to in Article 2 paragraph (1) letter b, BPR and BPRS must adhere to the principles of:
a. adequate capital; and b. effective application of risk management, to support the continuity of BPR and BPRS product management.

Article 6
(1) BPR and BPRS are required to have written policies and procedures in the management of Products.
(2) Written policies and procedures as referred to in paragraph (1) must at least cover:
a. the determination of business benefits and customer needs for the Product; b. the identification of all risks inherent in the Product and their mitigation;
c. recording methods and accounting information systems for the Product;
d. the determination of criteria and evaluation processes for third parties, if the management of the Product is carried out through cooperation; and e. methods for measuring and monitoring risks over BPR and BPRS Products. (3) BPR and BPRS are required to periodically review and update the policies and procedures as referred to in paragraph (2). (4) BPR or BPRS violating the provisions as referred to in paragraph (1) and/or paragraph (3) shall be subject to administrative sanctions in the form of a written reprimand. (5) In the event that BPR or BPRS:
a. has been subject to administrative sanctions as referred to in paragraph (4) and continues to violate the provisions as referred to in paragraph (1) and/or paragraph (3); or b. has not been subject to administrative sanctions as referred to in paragraph (4) but based on the Financial Services Authority's assessment there is a violation that poses significant risk, BPR or BPRS may be subject to administrative sanctions in the form of:

prohibition to manage New Products; and/or
downgrade of the health level of BPR or BPRS.
(6) In the event that BPR or BPRS:
a. has been subject to administrative sanctions as referred to in paragraph (4) and/or paragraph (5) and continues to violate the provisions as referred to in paragraph (1) and/or paragraph (3); or b. has not been subject to administrative sanctions as referred to in paragraph (4) and/or paragraph (5) but based on the Financial Services Authority's assessment there is a violation that poses significant risk, the principal party of BPR or BPRS may be subject to administrative sanctions in the form of prohibition as a principal party in accordance with Financial Services Authority Regulations concerning the re-evaluation of principal parties of financial service institutions.

CHAPTER IV
MECHANISM FOR MANAGEMENT OF NEW PRODUCTS
Section One
New Basic Products
Article 7
(1) BPR and BPRS managing Products comprising other basic activities as referred to in Article 2 paragraph (2) letter d are required to submit a report on the realization of the management of new basic Products to the Financial Services Authority at the latest 10 (ten) working days after the date of management of the new basic Product. (2) The realization report as referred to in paragraph (1) is accompanied by a checklist of documents for the realization report of the management of new basic Products as contained in Appendix Section A which is an integral part of this Financial Services Authority Regulation.

Section Two
New Advanced Products
Article 8
(1) BPR and BPRS that will manage Advanced Products as referred to in Article 2 paragraph (3) letters a and b are required to obtain approval for the management of new Advanced Products from the Financial Services Authority. (2) To obtain approval as referred to in paragraph (1), BPR and BPRS conduct limited pilot projects. (3) BPR and BPRS are required to report the plan for the implementation of the limited pilot project as referred to in paragraph (2) at the latest 10 (ten) working days before the implementation of the limited pilot project to the Financial Services Authority. (4) The report on the plan for the implementation of the limited pilot project as referred to in paragraph (3) is accompanied by a checklist of documents for the management of new Advanced Products as contained in Appendix Section B which is an integral part of this Financial Services Authority Regulation. (5) BPR and BPRS determine the scope and scenario for the implementation of the limited pilot project as referred to in paragraph (2). (6) In the limited pilot project, BPR and BPRS are required to inform prospective customers and/or customers that the Product being used is an Advanced Product that is being piloted and has not yet obtained approval from the Financial Services Authority.

Article 9
During the implementation of the limited pilot project, the Financial Services Authority may conduct an assessment of the implementation of the limited pilot project conducted by BPR and BPRS.

Article 10
(1) BPR and BPRS submit the approval request as referred to in Article 8 paragraph (1) to the Financial Services Authority after BPR and BPRS have completed the entire limited pilot project process. (2) The approval request as referred to in paragraph (1) is accompanied by supporting documents for the completion of the limited pilot project. (3) The Financial Services Authority provides approval for the request for management of new Advanced Products as referred to in paragraph (2) at the latest 10 (ten) working days after the request documents are received by the Financial Services Authority. (4) The time period as referred to in paragraph (3) does not include time given to BPR and BPRS to complete, repair, and/or update the request documents for approval for the management of new Advanced Products.

Article 11
(1) In the event that certain criteria are met, BPR and BPRS submit a request for approval for the management of new Advanced Products without going through a limited pilot project. (2) Certain criteria as referred to in paragraph (1) include:
a. the new Advanced Product is related to products or activities of non-bank financial service institutions that require permits and/or approvals from the Financial Services Authority; b. the new Advanced Product requires permits and/or approvals from other authorities as referred to in Article 2 paragraph (3) letter c;
c. the new Advanced Product is a product, service, service, and/or other activity to support the implementation of government programs; and/or
d. BPR and BPRS prove that the management of the new Advanced Product does not require a limited pilot project.
(3) BPR and BPRS are required to submit a request for approval for the management of new Advanced Products as referred to in paragraph (1) to the Financial Services Authority. (4) BPR and BPRS that will manage new Advanced Products that require permits and/or approvals from other authorities as referred to in paragraph (2) letter c submit the approval request to the Financial Services Authority after obtaining permits and/or approvals from other authorities. (5) The approval request as referred to in paragraph (3) is accompanied by a checklist of documents for the management of new Advanced Products as contained in Appendix Section B which is an integral part of this Financial Services Authority Regulation. (6) The Financial Services Authority processes the request and provides approval or rejection for the request for management of new Advanced Products as referred to in paragraph (1) at the latest 14 (fourteen) working days after the request documents are received completely by the Financial Services Authority. (7) The time period as referred to in paragraph (6) does not include time given to BPR and BPRS to complete, repair, and/or update the request documents for approval for the management of new Advanced Products.

Article 12
(1) BPR and BPRS that will manage new Advanced Products comprising:
a. development of information technology-based activities as referred to in Article 2 paragraph (3) letter a; or b. products, services, services, and/or other activities that affect the risk profile assessment of BPR or BPRS as referred to in Article 2 paragraph (3) letter b, may be exempted from fulfilling the provisions as referred to in Article 8, Article 10, and Article 11. (2) In the event that BPR and BPRS meet the criteria:
a. risk rating with rating 1 (one) or rating 2 (two) in the last 2 (two) periods; and b. health level with a healthy rating or composite rating 1 (one) in the last 2 (two) periods, the exemption as referred to in paragraph (1) may be applied. (3) BPR and BPRS are required to submit a request for approval in the form of a notification regarding the plan for the management of new Advanced Products to the Financial Services Authority before the management of the new Advanced Product as referred to in paragraph (1). (4) The notification regarding the plan for the management of new Advanced Products as referred to in paragraph (3) is accompanied by a checklist of documents for the management of new Advanced Products as contained in Appendix Section B which is an integral part of this Financial Services Authority Regulation. (5) In the event that the Financial Services Authority does not submit an objection within a time period of 10 (ten) working days after the request documents are received completely by the Financial Services Authority, the approval for the management of new Advanced Products submitted by BPR or BPRS as referred to in paragraph (2) becomes effective.

Article 13
(1) In the event that in the Financial Services Authority's assessment:
a. the plan for the implementation of the limited pilot project as referred to in Article 8 paragraph (3); b. the results of the implementation of the limited pilot project as referred to in Article 9;
c. the proof submitted by BPR or BPRS as referred to in Article 11 paragraph (2) letter d; or
d. the notification regarding the plan for the management of new Advanced Products as referred to in Article 12 paragraph (3), is not in accordance with statutory regulations and/or has the potential to pose significant risk, the Financial Services Authority is authorized to take specific actions. (2) The authority of the Financial Services Authority to take specific actions as referred to in paragraph (1) includes:
a. requesting BPR and BPRS to fulfill requirements and/or adjust the management mechanism to go through a limited pilot project as referred to in Article 8 and Article 10; b. requesting BPR and BPRS to fulfill requirements and/or adjust the management mechanism to approval without going through a limited pilot project as referred to in Article 11 paragraph (3); or
c. stopping the plan for the management of new Advanced Products.

Article 14
(1) BPR and BPRS must manage new Advanced Products at the latest 6 (six) months since obtaining approval from the Financial Services Authority.
(2) If BPR and BPRS do not manage new Advanced Products within the time period as referred to in paragraph (1), the approval of the Financial Services Authority becomes invalid.

Article 15
(1) BPR and BPRS managing new Advanced Products are required to submit a report on the realization of the management of new Advanced Products to the Financial Services Authority at the latest 10 (ten) working days after the date of management of the new Advanced Product. (2) The realization report as referred to in paragraph (1) must at least contain information and explanations regarding:
a. the type and name of the new Advanced Product; b. the date of management of the new Advanced Product accompanied by relevant evidence explaining the start of the management of the new Advanced Product; and
c. an explanation regarding the conformity between the implementation and the approval for the new Advanced Product being managed.

Article 16
(1) BPR or BPRS violating the provisions as referred to in Article 8 paragraph (1), paragraph (3), paragraph (6), Article 11 paragraph (3), and/or Article 12 paragraph (3) shall be subject to administrative sanctions in the form of a written reprimand. (2) In the event that BPR or BPRS:
a. has been subject to administrative sanctions as referred to in paragraph (1) and continues to violate the provisions as referred to in Article 8 paragraph (1), paragraph (3), paragraph (6), Article 11 paragraph (3), and/or Article 12 paragraph (3); or b. has not been subject to administrative sanctions as referred to in paragraph (1) but based on the Financial Services Authority's assessment there is a violation that poses significant risk, BPR or BPRS may be subject to administrative sanctions in the form of a downgrade of the health level of BPR or BPRS. (3) In the event that BPR or BPRS:
a. has been subject to administrative sanctions as referred to in paragraph (1) and/or paragraph (2) and continues to violate the provisions as referred to in Article 8 paragraph (1), paragraph (3), paragraph (6), Article 11 paragraph (3), and/or Article 12 paragraph (3); or b. has not been subject to administrative sanctions as referred to in paragraph (1) and/or paragraph (2) but based on the Financial Services Authority's assessment there is a violation that poses significant risk, the principal party of BPR or BPRS may be subject to administrative sanctions in the form of prohibition as a principal party in accordance with Financial Services Authority Regulations concerning the re-evaluation of principal parties of financial service institutions. (4) BPR or BPRS that are late in submitting reports as referred to in Article 7 paragraph (1) and/or Article 15 paragraph (1) shall be subject to administrative sanctions in the form of a fine of IDR 100,000.00 (one hundred thousand rupiah) per working day of delay per Product and at most IDR 5,000,000.00 (five million rupiah) per Product. (5) The imposition of administrative sanctions as referred to in paragraph (4) does not eliminate the obligation to submit reports for BPR or BPRS that have not submitted reports as referred to in Article 7 paragraph (1) and/or Article 15 paragraph (1).

CHAPTER V
ADJUSTMENT OF PRODUCT MANAGEMENT PLANS
Article 17
(1) Based on certain considerations, BPR and BPRS may adjust the plan for the management of new Products other than those already submitted in the business plan as referred to in Article 3 paragraph (2). (2) The Financial Services Authority may request BPR and BPRS to make improvements to the adjustment of the plan for the management of new Products as referred to in paragraph (1). (3) BPR and BPRS submit the adjustment of the plan for the management of new Products as referred to in paragraph (1) at the latest 1 (one) month before the management of the new Product along with the reasons for the adjustment. (4) The document for the submission of the adjustment of the plan for the management of new Products as referred to in paragraph (3) is contained in Appendix Section C which is an integral part of this Financial Services Authority Regulation. (5) The Financial Services Authority is authorized to approve or disapprove the adjustment of the plan for the management of new Products submitted by BPR or BPRS at the latest 10 (ten) working days after the documents as referred to in paragraph (4) are received completely.

CHAPTER VI
TERMINATION OF BPR AND BPRS PRODUCTS
Article 18
Product termination can be done based on:
a. initiative from BPR and BPRS; or b. order from the Financial Services Authority.

Article 19
(1) Plans for Product termination based on initiative from BPR and BPRS as referred to in Article 18 letter a that are estimated to affect the business activities of BPR and BPRS are submitted in the BPR and BPRS business plan. (2) BPR and BPRS are required to submit a report on the realization of the termination of BPR and BPRS Products as referred to in Article 18 letter a to the Financial Services Authority at the latest 10 (ten) working days after the date of termination. (3) The realization report of Product termination as referred to in paragraph (2) must at least contain information and explanations regarding:
a. the type and name of the terminated Product; b. the time of termination;
c. the reason for termination; and
d. steps for settlement or transfer of obligations to customers and/or other parties.
(4) BPR or BPRS that are late in submitting reports as referred to in paragraph (2) shall be subject to administrative sanctions in the form of a fine of IDR 100,000.00 (one hundred thousand rupiah) per working day of delay per Product and at most IDR 5,000,000.00 (five million rupiah) per Product. (5) The imposition of administrative sanctions as referred to in paragraph (4) does not eliminate the obligation to submit reports for BPR or BPRS that have not submitted reports as referred to in paragraph (2).

Article 20
(1) The Financial Services Authority orders BPR and BPRS to terminate Products as referred to in Article 18 letter b if they meet the criteria:
a. the Product being managed is not in accordance with statutory regulations; and/or b. there are other considerations.
(2) Product termination as referred to in paragraph (1) can be temporary or permanent based on the determination of the Financial Services Authority.
(3) BPR and BPRS ordered to terminate the management of Products as referred to in paragraph (1) are required to:
a. submit information to customers regarding the termination of the Product; and b. submit a plan of action for Product termination to the Financial Services Authority which contains:

settlement of obligations to BPR or BPRS customers and/or other parties;
improvement of the Product; and/or
other necessary actions.
(4) The period of Product termination and the deadline for submitting the plan of action for Product termination as referred to in paragraph (3) are determined by the Financial Services Authority. (5) BPR or BPRS violating the provisions as referred to in paragraph (3) shall be subject to administrative sanctions in the form of a written reprimand. (6) In the event that BPR or BPRS:
a. has been subject to administrative sanctions as referred to in paragraph (5) and continues to violate the provisions as referred to in paragraph (3); or b. has not been subject to administrative sanctions as referred to in paragraph (5) but based on the Financial Services Authority's assessment there is a violation that poses significant risk, BPR or BPRS may be subject to administrative sanctions in the form of:
prohibition to manage New Products; and/or
downgrade of the health level of BPR or BPRS.
(7) In the event that BPR or BPRS:
a. has been subject to administrative sanctions as referred to in paragraph (5) and/or paragraph (6) and continues to violate the provisions as referred to in paragraph (3); or b. has not been subject to administrative sanctions as referred to in paragraph (5) and/or paragraph (6) but based on the Financial Services Authority's assessment there is a violation that poses significant risk, the principal party of BPR or BPRS may be subject to administrative sanctions in the form of prohibition as a principal party in accordance with Financial Services Authority Regulations concerning the re-evaluation of principal parties of financial service institutions.

CHAPTER VII
CONSUMER PROTECTION AND
FULFILLMENT OF SHARIA PRINCIPLES
Article 21
BPR and BPRS are required to apply consumer protection principles in the management of Products in accordance with

regulations regarding consumer protection in the financial services sector.

Article 22
(1) BPRS is required to apply Sharia Principles in the management of Products.
(2) The fulfillment of the application of Sharia Principles as referred to in paragraph (1) must be supported by:
a. a fatwa of the National Sharia Council of the Indonesian Ulema Council which serves as the basis for the management of the Product or a letter from the National Sharia Council of the Indonesian Ulema Council addressed to the BPRS in the event that a fatwa of the National Sharia Council of the Indonesian Ulema Council is not yet available; and b. an opinion from the Sharia Supervisory Board regarding the new BPRS Product. (3) The opinion from the Sharia Supervisory Board regarding the new BPRS Product as referred to in paragraph (2) letter b must at least cover:
a. the new BPRS Product is based on a fatwa of the National Sharia Council of the Indonesian Ulema Council; b. the conformity of the new BPRS Product with the fatwa of the National Sharia Council of the Indonesian Ulema Council, at least covering:

the contract used and the fulfillment of the elements in the contract used;
the object of the transaction and the purpose of use;
the conformity of the determination of bonus/profit-sharing ratio/margin/ujrah/fee with the contract used, including in the event that a re-evaluation of the profit-sharing ratio/margin/ujrah is required for the Product for fund disbursement;
the determination of administrative costs; and
the determination of gifts, penalties/sanctions, and/or compensation, discounts, accelerated repayment, and treatment of collateral, if any.
c. operational standard procedures for the new BPRS Product regarding the fulfillment of Sharia Principles; and
d. the results of a re-evaluation of the concept of contracts, agreements, or application forms for the new BPRS Product regarding the fulfillment of Sharia Principles. (4) The format of the opinion of the BPRS Sharia Supervisory Board as referred to in paragraph (3) is contained in Appendix Part D which is an inseparable part of this Financial Services Authority Regulation.

Article 23
(1) BPR or BPRS that violates the provisions as referred to in Article 21 and/or Article 22 paragraph (1) shall be subject to administrative sanctions in the form of a written reprimand. (2) In the event that BPR or BPRS:
a. has been subject to administrative sanctions as referred to in paragraph (1) and continues to violate the provisions as referred to in Article 21 and/or Article 22 paragraph (1); or b. has not been subject to administrative sanctions as referred to in paragraph (1) but based on the assessment of the Financial Services Authority there is a violation that poses significant risk, BPR or BPRS may be subject to administrative sanctions in the form of:

a ban on managing new Products; and/or
a downgrade of the health level of the BPR or BPRS.
(3) In the event that BPR or BPRS:
a. has been subject to administrative sanctions as referred to in paragraph (1) and/or paragraph (2) and continues to violate the provisions as referred to in Article 21 and/or Article 22 paragraph (1); or b. has not been subject to administrative sanctions as referred to in paragraph (1) and/or paragraph (2) but based on the assessment of the Financial Services Authority there is a violation that poses significant risk, the principal party of the BPR or BPRS may be subject to administrative sanctions in the form of a ban as a principal party in accordance with the Financial Services Authority Regulation regarding the re-evaluation of the principal party of financial service institutions.

CHAPTER VIII
OTHER PROVISIONS

Article 24
The Financial Services Authority may establish different policies based on certain considerations regarding the group of Products, principles of Product management, and/or mechanisms for managing new Products other than those regulated in this Financial Services Authority Regulation.

CHAPTER IX
TRANSITIONAL PROVISIONS

Article 25
(1) Reports and/or requests for approval for the management of business activities and products and/or new activities that have been submitted and received completely before this Financial Services Authority Regulation takes effect shall continue to refer to the Financial Services Authority Regulations in effect at the time of submission of the report and/or request for approval. (2) Until the provisions for the full implementation of risk management by BPRS take effect in accordance with the Financial Services Authority Regulation regarding the implementation of risk management for BPRS, the risk level assessment as referred to in Article 12 paragraph (2) letter a for BPRS shall be conducted using the risk implementation component rating of rating A or rating B in accordance with the Financial Services Authority Regulation regarding the BPRS health level assessment system.

CHAPTER X
CLOSING PROVISIONS

Article 26
Upon the entry into force of this Financial Services Authority Regulation:
a. Article 18, Article 19, and Article 23 of Financial Services Authority Regulation Number 13/POJK.03/2015 regarding the Implementation of Risk Management for Rural Credit Banks (State Gazette of the Republic of Indonesia Year 2015 Number 272, Supplement to the State Gazette of the Republic of Indonesia Number 5761); b. Financial Services Authority Regulation Number 24/POJK.03/2015 regarding Products and Activities of Sharia Banks and Sharia Business Units (State Gazette of the Republic of Indonesia Year 2015 Number 289, Supplement to the State Gazette of the Republic of Indonesia Number 5771); and
c. Financial Services Authority Regulation Number 12/POJK.03/2016 regarding Business Activities and Office Network Areas of Rural Credit Banks Based on Core Capital (State Gazette of the Republic of Indonesia Year 2016 Number 34, Supplement to the State Gazette of the Republic of Indonesia Number 5849),
are repealed and declared invalid.

Article 27
Upon the entry into force of this Financial Services Authority Regulation, the implementation provisions of:
a. Financial Services Authority Regulation Number 24/POJK.03/2015 regarding Products and Activities of Sharia Banks and Sharia Business Units (State Gazette of the Republic of Indonesia Year 2015 Number 289, Supplement to the State Gazette of the Republic of Indonesia Number 5771); and b. Financial Services Authority Regulation Number 12/POJK.03/2016 regarding Business Activities and Office Network Areas of Rural Credit Banks Based on Core Capital (State Gazette of the Republic of Indonesia Year 2016 Number 34, Supplement to the State Gazette of the Republic of Indonesia Number 5849), are declared to remain in force insofar as they do not conflict with the provisions in this Financial Services Authority Regulation.

Article 28
This Financial Services Authority Regulation shall take effect on the date of its promulgation.

This copy is in accordance with the original
Director of Law 1
Legal Department signed
Mufli Asmawidjaja

In order that everyone may know it, it is ordered to promulgate this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.

Determined in Jakarta on 14 December 2021
CHAIRMAN OF THE COMMISSIONERS COUNCIL
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
WIMBOH SANTOSO

Promulgated in Jakarta on 15 December 2021
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2021 NUMBER 271

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 25 /POJK.03/2021
REGARDING
THE MANAGEMENT OF PRODUCTS OF RURAL CREDIT BANKS AND SHARIA RURAL FINANCING BANKS

I. GENERAL
The development of financial products and services, especially those utilizing information technology, is increasing not only in the banking industry but also in non-bank financial institutions. BPR and BPRS, as one type of bank, need support in terms of regulations and policies that help create a competitive industry in providing Products according to community needs, especially in the micro and small business segments. These Products can be provided by BPR and BPRS through independent innovation or collaboration with other institutions.

Innovation of BPR and BPRS Products, especially those utilizing information technology, can support the creation of industry efficiency and help accelerate regional financial inclusion. Nevertheless, this also poses challenges related to the ability of BPR and BPRS to manage Products and manage their risks. Therefore, regulatory changes are needed to become more responsive and principle-based while still considering the capacity and ability of BPR and BPRS to manage Products. These regulatory changes are carried out, among others, by grouping business activities that were previously linked to core capital into a risk-based approach and the application of general principles of Product management, especially those related to capital and financial capacity as well as risk management.

In addition, the management of Products by BPR and BPRS needs to consider the needs and abilities of customers and the surrounding community for financial services. BPR and BPRS also need to ensure that the management of Products can run well so that the goal of customer protection can be achieved. The acceleration and perfection of granting approval for Product management is another important aspect that needs to be improved to match the business needs of BPR and BPRS.

This Financial Services Authority Regulation is intended to increase the competitiveness of the BPR and BPRS industry, both at the regional and national levels. This increase in competitiveness is expected to be followed by improvements in risk management and corporate governance of BPR and BPRS in the management of Products, so that every innovation in business activities can be accounted for. In this regard, it is necessary to update regulations regarding the management of BPR and BPRS Products.

II. ARTICLE BY ARTICLE

Article 1
Clear enough.

Article 2
Paragraph (1)
Clear enough.
Paragraph (2)
Letter a
Basic products related to fund gathering include deposits in the form of savings and/or time deposits and loans or financing received.
Letter b
Basic products related to fund disbursement are in the form of credit or financing.
Letter c
Basic products related to fund placement, among others in the form of:

demand deposits, time deposits, certificates of deposits, and/or savings at commercial banks and Sharia commercial banks; and
time deposits and/or savings at BPR and BPRS.
Letter d
Basic products related to other basic activities, among others:
transfer or transfer of funds, whether for own interests or customer interests;
mass employee salary payment services;
fund receipt services for bill payment services; and
cooperation with other institutions in providing financial services and supporting the provision of financial services, including agency activities, including office-less financial agent services for inclusive finance, bancassurance reference business model, marketing electronic money from other issuers, cooperation for receiving and/or sending money from and to abroad, and cooperation with information technology-based money lending service providers with a reference business model.
Paragraph (3)
Letter a
Products based on information technology include among others:
electronic banking services, namely services for customers to obtain information, communicate, and conduct banking transactions through electronic media, such as short message service (SMS) banking, mobile banking, or internet banking;
providers of office-less financial services in the context of inclusive finance; and
other information technology-based activities for customers through media or devices connected to the BPR or BPRS system or data.
Letter b
Products related to the management of activities or products of non-bank financial service institutions include among others:
bancassurance distribution business model;
bancassurance integration business model; and
cooperation with non-bank financial service institutions in marketing financial products.
Products that affect the risk profile assessment of BPR or BPRS are advanced products other than those mentioned, among others:
foreign currency exchange business activities;
safe deposit box services; and
cooperation with other institutions in providing financial services and supporting the provision of financial services, including cooperation with information technology-based money lending service providers with a channeling business model.
Letter c
Products that require permits and/or approval from other authorities, among others:
the provision of access to funding sources for payments in the form of issuing payment instruments such as card or cardless payment instruments; and
activities of other payment system service providers.
Paragraph (4)
The determination of advanced products as basic products takes into account, among others, the risk level of the product in question.

Article 3
Paragraph (1)
Clear enough.
Paragraph (2)
The inclusion of the management of new Products in the business plan of BPR and BPRS in accordance with the Financial Services Authority Regulation regarding the business plan of BPR and BPRS.

Article 4
Clear enough.

Article 5
The principles of Product management are fulfilled by BPR and BPRS during the entire process of Product management consistently and continuously starting from the planning stage to implementation. Letter a What is meant by "adequate capitalization" is the fulfillment of the minimum capital adequacy ratio and minimum core capital ratio and the ability to absorb risks that may arise from the management of Products. The fulfillment of the minimum capital adequacy ratio and minimum core capital ratio is in accordance with the Financial Services Authority Regulation regarding minimum capital adequacy requirements and the fulfillment of minimum core capital which applies to BPR or BPRS. Letter b The application of effective risk management is aimed at identifying and mitigating risks arising in the management of Products, including main pillars in accordance with the Financial Services Authority Regulation regarding the implementation of risk management applicable to BPR or BPRS. Included in the application of risk management is BPR and BPRS ensuring the readiness of information technology, especially for advanced products based on information technology.

Article 6
Paragraph (1)
Clear enough.
Paragraph (2)
Letter a
The management of Products is carried out by considering:

business benefits that are in line with the established strategy and business plan; and
the principle of benefit and customer needs for the Product to be managed.
Letter b
The identification of all risks inherent in the Product is carried out by BPR and BPRS among others to:
measure the level of risk and mitigation to be carried out by BPR or BPRS before the management of the Product; and
determine the criteria for Products to be managed, including in new Products.
As one form of risk mitigation implementation, BPR and BPRS among others prepare the scope and scenario for the implementation of limited pilot projects.
Letter c
Clear enough.
Letter d
The determination of criteria and evaluation processes is carried out among others by ensuring that third parties with whom cooperation is sought have permits, approvals, or business certificates from competent agencies or authorities. Letter e Measurement and monitoring by BPR and BPRS are contained in systems and procedures among others to evaluate:
risks and business benefits arising from the management of Products; and
the conformity of the realization of Product management with plans or targets previously prepared.
Paragraph (3)
Re-evaluation and updating of policies and procedures are carried out periodically in accordance with the respective policies of BPR and BPRS by considering internal and external factors among others new Product development plans and regulatory changes. Paragraph (4) Clear enough. Paragraph (5) Letter a Clear enough. Letter b The assessment of significant risk by the Financial Services Authority is among others when a violation of regulations results in the capitalization of BPR or BPRS becoming inconsistent with the provisions of legislation regarding minimum capital adequacy requirements and the fulfillment of minimum core capital applicable to BPR or BPRS or exceeding the risk tolerance that can be absorbed by BPR or BPRS. Paragraph (6) Clear enough.

Article 7
Clear enough.

Article 8
Paragraph (1)
Clear enough.
Paragraph (2)
Limited pilot projects (piloting review) are a means used by BPR and BPRS to carry out a series of activities in preparing for the management of Products that meet customer needs, test the accuracy and functionality of systems, and evaluate the impact of limited pilot projects on the risk profile of BPR and BPRS. Paragraph (3) Clear enough. Paragraph (4) Clear enough. Paragraph (5) The determination of the scope and scenario for the implementation of limited pilot projects aims to enable BPR and BPRS to identify and mitigate risks that may arise from the management of new advanced products. The determination of the scope or limitations of the pilot can be adjusted to the level of risk to be taken by BPR and BPRS in accordance with policies and procedures in the management of Products. The scope of limited pilot projects includes among others the duration of the limited pilot implementation including the time for Product management, target customers and/or prospective customers, location or area of the limited pilot, and transaction limits. The scenario for the implementation of limited pilot projects includes among others conditions of failure in the implementation of the limited pilot project and the resolution to be carried out by BPR and BPRS. Paragraph (6) BPR and BPRS adequately document the submission of information to prospective customers and/or customers regarding the advanced Product being piloted.

Article 9
Assessments carried out by the Financial Services Authority include conducting evaluations and providing recommendations for improvements regarding the implementation of limited pilot projects (proof of concept), among others carried out through meetings or written documents to prove that the concept of the new advanced product being piloted is viable and ready to be managed. Evaluations and improvement recommendations from the Financial Services Authority cover matters that affect the risk level of BPR and BPRS along with risk mitigation and problem resolution, among others related to the scope and duration of the limited pilot project and the readiness of infrastructure and resources of BPR and BPRS.

Article 10
Paragraph (1)
Limited pilot projects are categorized as completed after BPR and BPRS ensure that during the limited pilot project period there are no problems arising in connection with the management of the Product, including following up on recommendations given by the Financial Services Authority while still considering the duration of the limited pilot project that has been established. Paragraph (2) The supporting documents mentioned can be in the form of documents explaining the results of the final evaluation of the Product that has been piloted and the approval of the issuance of the Product. Paragraph (3) Clear enough. Paragraph (4) Clear enough.

Article 11
Paragraph (1)
Clear enough.
Paragraph (2)
Letter a
What is meant by "permit and/or approval from the Financial Services Authority" is a permit and/or approval from the supervisor of non-bank financial service institutions. Letter b Clear enough. Letter c Clear enough. Letter d BPR and BPRS submit an explanation that a limited pilot project proving that the plan for the management of new advanced products does not have a material impact on the risk profile, health status rating, main financial ratios, and there are business reasons underlying it, is not necessary. Paragraph (3) Clear enough. Paragraph (4) Copies of letters requesting permits and/or approvals from other authorities are sent to the Financial Services Authority. Paragraph (5) Clear enough. Paragraph (6) Complete receipt of application documents includes the number and content of documents in accordance with requirements. Paragraph (7) Clear enough.

Article 12
Paragraph (1)
Exemption from the provisions of Article 11 is carried out while still considering policies and/or provisions of the non-bank financial service institution sector or other authorities. Paragraph (2) Letter a The risk level assessment used is the result of assessment by the Financial Services Authority in accordance with the Financial Services Authority Regulation regarding the implementation of risk management applicable to BPR and BPRS. Letter b The health level assessment used is the result of assessment by the Financial Services Authority in accordance with the provisions of legislation regarding the health level assessment of rural credit banks or the Financial Services Authority Regulation regarding the BPRS health level assessment system. Paragraph (3) Clear enough. Paragraph (4) Clear enough. Paragraph (5) The effective implementation of new advanced products (instant approval) is one form of acceleration of permitting from the Financial Services Authority for BPR or BPRS.

Article 13
Paragraph (1)
Potentially posing significant risk is among others when the issuance of a product results in the capitalization of BPR or BPRS becoming inconsistent with the provisions of legislation regarding minimum capital adequacy requirements and the fulfillment of minimum core capital applicable to BPR or BPRS or exceeding the risk tolerance that can be absorbed by BPR or BPRS. Paragraph (2) Letter a Notification regarding the plan for the management of new advanced products (instant approval) or approval without a limited pilot project is adjusted to be carried out through a limited pilot project. Letter b The implementation of a limited pilot project or notification regarding the plan for the management of new advanced products (instant approval) is adjusted to be carried out through an approval mechanism without a limited pilot project. Letter c Including stopping means requesting BPR and BPRS to settle obligations to customers and/or other parties, if a limited pilot project has been implemented.

Article 14
Clear enough.

Article 15
Clear enough.

Article 16
Clear enough.

Article 17
Paragraph (1)
Certain considerations for adjusting the plan for the management of new Products include among others:

the management of Products aims to support the implementation of government programs or policies of other authorities;
new Products do not significantly affect operational activities and/or affect the performance of BPR and BPRS; and/or
the follow-up form of financial industry policies and/or implementation of new fatwas issued by the National Sharia Council of the Indonesian Ulema Council.
Adjustment of the plan for the management of Products includes the addition of plans for the management of new Products and/or refinement of plans for the management of new Products that have previously been included in the business plan. Paragraph (2) Clear enough. Paragraph (3) Clear enough. Paragraph (4) Clear enough. Paragraph (5) Clear enough.

Article 18
Clear enough.

Article 19
Paragraph (1)
Assessment of the plan for the cessation of Products that is estimated to affect the business activities of BPR and BPRS is carried out in accordance with the Financial Services Authority Regulation regarding the business plan of BPR and BPRS. Paragraph (2) Clear enough. Paragraph (3) Clear enough. Paragraph (4) Clear enough. Paragraph (5) Clear enough.

Article 20
Paragraph (1)
Letter a
Clear enough.
Letter b
Other considerations for stopping Products based on orders from the Financial Services Authority, among others:

the management of Products affects or has the potential to worsen the risk profile of BPR or BPRS;
the emergence of material losses to the financial condition of BPR or BPRS;
information regarding sanctions for the cessation or revocation of licenses for the implementation of specific products by other authorities;
the implementation of the Product does not match the approval application or the realization report submitted to the Financial Services Authority; or
does not comply with Sharia Principles, for BPRS.

Paragraph (2)
Clear enough.

Paragraph (3)
What is meant by "cessation" is the cessation of offering, selling, and entering into new agreements or transactions for BPR or BPRS Products.

Paragraph (4)
Clear enough.

Paragraph (5)
Clear enough.

Paragraph (6)
Clear enough.

Paragraph (7)
Clear enough.

Article 21
The mechanism and procedures for applying consumer protection principles are carried out in accordance with the Financial Services Authority Regulation regarding consumer protection in the financial services sector.

Article 22
Paragraph (1)
Clear enough.

Paragraph (2)
Letter a
Clear enough.

Letter b
The opinion of the Sharia Supervisory Board, namely opinions that among others refer to the fatwas of the National Sharia Council of the Indonesian Ulema Council and regulations regarding the implementation of Sharia principles in the business activities of Sharia banks and Sharia business units.

Paragraph (3)
Clear enough.

Paragraph (4)
Clear enough.

Article 23
Clear enough.

Article 24
The determination of different policies, among others regarding the grouping and mechanism for the implementation of new Products, including regarding administrative requirement documents. In determining such different policies, the Financial Services Authority considers external and internal factors in the form of data and/or information obtained regarding the new Product.

Article 25
Paragraph (1)
Financial Services Authority Regulations in effect at the time of submitting the report and/or approval application are:

Financial Services Authority Regulation Number 12/POJK.03/2016 concerning Business Activities and Network Areas of Rural Credit Bank Offices Based on Core Capital, for BPR; and
Financial Services Authority Regulation Number 24/POJK.03/2015 concerning Products and Activities of Sharia Banks and Sharia Business Units, for BPRS.

Paragraph (2)
The implementation of full BPRS risk management applies, namely BPRS will apply overall risk rating assessments based on core capital of BPRS in accordance with the Financial Services Authority Regulation regarding the implementation of risk management for BPRS.

Article 26
Clear enough.

Article 27
Clear enough.

Article 28
Clear enough.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6743

APPENDIX
FINANCIAL SERVICES AUTHORITY REGULATION
OF THE REPUBLIC OF INDONESIA
NUMBER 25 /POJK.03/2021
CONCERNING
THE IMPLEMENTATION OF PRODUCTS OF RURAL CREDIT BANKS AND SHARIA RURAL FINANCING BANKS

Part A
DOCUMENT CHECKLIST FOR REPORTING THE IMPLEMENTATION OF NEW BASIC PRODUCTS

No. Description
Completeness
Yes No
Documents and
Explanation

General information or summary
regarding the new basic Product, at least including:
a. Name and type of new basic Product; b. Implementation time of the new basic Product;
c. Features and business model and
relevance to business strategy; d. Benefits of implementing the new basic Product for BPR or BPRS.
Analysis of identification and mitigation of risks
inherent in the new basic Product including costs for BPR or BPRS.
Information regarding benefits and risks
for customers.
Pattern and main points of cooperation agreements between BPR
or BPRS with third parties including rights and obligations of the parties, if any.
Opinion from the Sharia Supervisory Board, for
BPRS.

We, who sign below, declare that the checklist has been filled out and compiled completely in accordance with the actual situation and has been completed with correct documents in accordance with the provisions of legislation to be submitted to the Financial Services Authority in the context of reporting the implementation of new basic Products.

(Place), (date-month-year)
(Signature)
(Full Name of BPR or BPRS Board of Directors)

Part B
DOCUMENT CHECKLIST FOR IMPLEMENTATION OF NEW EXTENDED PRODUCTS

No. Description
Completeness
Yes No
Documents and
Explanation
I. General Documents
General information or summary regarding the new extended Product, at least including:

Name and type of new extended Product;
Implementation time of the new extended
Product;
Features and business model as well as
relevance to business strategy;
Business analysis in the form of potential and
market segments;
Information regarding benefits and
risks for customers;
Study of the plan for implementing the
new extended Product including financial and capital projections on the impact of implementing the new extended Product especially on ratios or key financial indicators of BPR or BPRS, at least for the first 1 (one) year.
II. Technical Documents
Policies and procedures regarding analysis of identification and mitigation of risks (among others credit risk, operational, compliance,

No. Description
Completeness
Yes No
Documents and
Explanation liquidity, reputation, and/or strategic risk) inherent in the implementation of the new extended Product, supported by documents including:

Standard operating procedures
for implementing the new extended
Product which include process flow (flow chart), authority, work units and relevant officers, implementation procedures according to the flow, transparency and customer protection, and complaint handling;
Explanation of the accounting information system (AIS) including methods
of recording financial transactions from the new extended Product;
Operational readiness including
organizational structure as well as human resources and information technology, and results of information technology audits, if any;
Mechanism of agreements or application
forms to customers that are in accordance with the provisions of legislation including description of the method of providing information regarding benefits and risks of the Product;
Business relationship patterns and/or
cooperation agreements with third parties including agreements and

No. Description
Completeness
Yes No
Documents and
Explanation rights and obligations of the parties, if any;
6. Procedures for applying Anti-Money
Laundering and Prevention of
Financing of Terrorism in the implementation of the new extended Product.
III. Other Documents

Opinion from the Sharia Supervisory Board,
for BPRS;
Readiness for the implementation of limited trials by BPR or BPRS for the
new Product and/or other documents required in the limited trial process such as scope and scenario of limited trial implementation (if a trial is conducted);
Other supporting information and
documents, such as permits and/or approval from other authorities, or documents regulated specifically in other Financial Services Authority Regulations.

(Place), (date-month-year)
(Signature)
(Full Name of BPR or BPRS Board of Directors)

Note:
*) Adjusted to the mechanism for reporting the plan for implementing the limited trial project/application for approval of implementation of new extended Products/notification of plan to implement new extended Products.

Part C
ADJUSTMENT OF PLAN FOR IMPLEMENTATION OF NEW PRODUCTS

No.
New Product Type 1)
Implementation Mechanism 2)
General Description 3)
Implementation Time Plan 4)
Benefits Costs Relevance to Business
Strategy
Risks of Implementing
New Product
Risk Mitigation for Implementing
New Product
For BPR or BPRS
For Customers CAPEX OPEX

Note:

New Product Type is filled with the type of product to be implemented. Example: savings, credit or financing, mobile banking, bancassurance, etc.
Implementation mechanism is filled with reporting, limited trial project, approval, or instant approval.
General description at least describes the product name, features, and business model of the new Product as well as the contract used for BPRS.
Implementation time plan is filled with the period of date, month, or quarter.

Part D
OPINION OF THE SHARIA SUPERVISORY BOARD

Name of new BPRS Product: …………
No. Description Opinion

The new Product is based on the fatwa of the National Sharia Council of the Indonesian Ulema Council.
The conformity of the new Product with the fatwa of the National Sharia Council of the Indonesian Ulema Council at least includes:
a. the contract used and fulfillment of elements in the contract used; b. the object of transaction and purpose of use;
c. conformity of the determination of bonus/profit sharing ratio/margin/
ujrah/fee with the contract used, including in the event of a need to review the profit sharing ratio/ margin/ujrah for the new Product for fund disbursement; d. the determination of administrative fees; and e. the determination of prizes, penalties/sanctions, and/or compensation, deductions, accelerated repayment, and treatment collateral, if any.
Standard operating procedures for the new Product related to
fulfillment of Sharia Principles.
Results of the review of the concept of contract, agreement, or
application form for the new Product related to fulfillment of Sharia Principles.
Conclusion:
…………………………………………………………………………………………………
…………………………………………………………………………………………………

This copy is in accordance with the original
Legal Director 1
Legal Department signed
Mufli Asmawidjaja
(Place), (date-month-year)
(Signature) (Signature)
(Sharia Supervisory Board) (Sharia Supervisory Board)

Determined in Jakarta on December 14, 2021
CHAIRMAN OF THE COMMISSIONERS BOARD
FINANCIAL SERVICES AUTHORITY
OF THE REPUBLIC OF INDONESIA, signed
WIMBOH SANTOSO

Regulation of the Financial Services Authority of the Republic of Indonesia Number 25/POJK.03/2021 concerning the Management of Products of Rural Credit Banks and Sharia Rural Financing Banks

Lineage: In force

Timeline