For companies with trade, investment, or payment relationships with business partners in Singapore, Bank Indonesia has just issued a regulation with the potential to change how such cross-border transactions are settled. Through Peraturan Anggota Dewan Gubernur (PADG) No. 25 of 2026 concerning the Settlement of Bilateral Transactions between Indonesia and Singapore Using Rupiah and Singapore Dollar through Banks, effective since 14 August 2026, Bank Indonesia and the Monetary Authority of Singapore have officially operationalized the Local Currency Transaction (LCT) framework, allowing certain transactions to be settled directly in Rupiah and Singapore Dollar, without the US Dollar as an intermediary currency.
For many companies, particularly those that regularly make import-export payments, direct investments, or affiliate transactions with entities in Singapore, this development is more than just regulatory news, it represents a genuine opportunity to reduce transaction costs and mitigate risks that have long been embedded in the use of a third-party currency. Every time a transaction is converted from Rupiah to US Dollar and then to Singapore Dollar (or vice versa), a company bears the cost of double conversion, along with exposure to US Dollar exchange rate fluctuations that are, in truth, irrelevant to the underlying trade relationship itself. The LCT scheme is designed to eliminate that additional layer of cost and risk.
That said, this benefit does not automatically apply to every transaction. PADG 25/2026 only applies to transactions channelled through banks appointed as Appointed Cross Currency Dealers (ACCD), nine banks in Indonesia and three banks in Singapore (DBS, OCBC, and UOB). This means a company must first determine whether the bank it currently uses qualifies as an ACCD, whether the nature of its transactions (trade, direct investment, or other cross-border payments) meets the criteria set out under the regulation, and whether its existing contracts and payment mechanisms need to be adjusted in order to take full advantage of this scheme.
This is precisely where proper legal guidance becomes essential. Many companies tend to leave this decision entirely to their treasury team or their bank, when in fact transitioning to the LCT scheme can touch on significant contractual matters, from payment currency clauses in trade agreements, to hedging provisions in financing agreements, to compliance with Peraturan Bank Indonesia No. 24/6/PBI/2022, which serves as the overarching legal basis for Indonesia’s policy on the use of Rupiah in international activities. Failing to properly adjust contractual documentation, or misinterpreting the scope of eligible transactions, can result in inefficiencies or even unintended compliance risks.
The implementation of the Indonesia-Singapore LCT framework presents opportunities for companies to streamline cross-border payment arrangements while also requiring careful consideration of the applicable regulatory and contractual framework.
Schinder Law Firm assists domestic and multinational companies in navigating regulatory developments affecting cross-border transactions, including reviewing trade, investment, financing, and intercompany agreements; assessing currency and payment provisions; advising on compliance with applicable Bank Indonesia regulations; and supporting companies in coordinating with their banking partners.
If your company is considering using the Indonesia-Singapore LCT framework or requires assistance in reviewing its existing cross-border payment arrangements, please contact Schinder Law Firm at info@schinderlawfirm.com for further consultation.
Author:
Dewi Susanti