For mid-market importers and exporters on the Indonesia-Singapore corridor, the operationalisation of the Local Currency Transaction (LCT) framework on 31 August 2026 is a practical shift in how cross-border payments can be routed. Bank Indonesia (BI) and the Monetary Authority of Singapore (MAS) have named appointed cross-currency dealers (ACCDs) on both sides, allowing trade, direct investment and cross-border payment flows to be settled directly in rupiah and Singapore dollars rather than through a third currency such as the US dollar.
This article explains what has changed, which banks are appointed, the FX and hedging implications of direct rupiah-SGD quotations, and the practical steps treasury teams should take to adapt.
What has changed
The LCT framework implements an August 2022 memorandum of understanding between BI and MAS, followed by operational guidelines in April 2026 and Indonesia's PADG No. 25 of 2026. The framework enables bilateral transactions to be invoiced and settled in local currencies, reducing reliance on a vehicle currency and promoting direct rupiah-SGD quotations.
According to the BI news release, the framework covers current account transactions, direct investment, and cross-border payments. This means that trade in goods and services, as well as investment flows, can now be denominated in rupiah or Singapore dollars.
Appointed banks
BI and MAS have appointed nine banks in Indonesia and three in Singapore as ACCDs. In Indonesia: BCA, CIMB Niaga, DBS Indonesia, Bank Mandiri, Maybank Indonesia, BNI, OCBC NISP, Bank Jatim, and UOB Indonesia. In Singapore: DBS, OCBC, and UOB.
These banks are authorised to facilitate LCT transactions. For traders, the practical implication is that they need to check whether their existing banking relationships include an ACCD. If not, they may need to open accounts with an appointed bank or use correspondent arrangements.
FX and hedging implications
One of the key benefits of the LCT framework is the potential for direct rupiah-SGD quotations, which can reduce the cost and complexity of converting through the US dollar. However, the depth of the direct market is still developing, and traders should compare direct quotes with the synthetic rate derived from USD conversions.
For hedging, the availability of rupiah-SGD forward contracts may increase as banks expand their product offerings. Traders should assess their currency exposure and consider hedging strategies that align with the new settlement options. The framework does not eliminate FX risk; it changes the currency pair and potentially the cost of hedging.
Practical setup steps
For cross-border traders, the following steps can help adapt to the LCT framework:
- Review banking relationships: Identify whether your current banks are ACCDs. If not, consider opening accounts with an appointed bank to access LCT facilities.
- Update invoicing and payment terms: Determine whether to invoice in rupiah or SGD, based on your exposure and the preferences of your counterparty. The LCT framework supports local currency invoicing.
- Assess FX and hedging needs: Evaluate the impact of switching from USD to direct rupiah-SGD settlement. Compare direct quotes with synthetic rates and consider hedging instruments available from your bank.
- Update treasury operations: Ensure your payment systems and accounting processes can handle local currency settlements. This may involve changes to payment instructions and reconciliation.
- Monitor regulatory developments: The framework is new, and operational details may evolve. Stay informed through BI and MAS announcements.
Why It Matters
The Indonesia-Singapore corridor is one of the busiest in ASEAN, with substantial trade and investment flows. The LCT framework reduces reliance on the US dollar, potentially lowering transaction costs and improving efficiency for businesses. For mid-market traders, this could mean better pricing and simpler settlement processes.
Commercial Impact
Businesses that adopt LCT early may gain a competitive advantage through reduced FX costs and faster settlement. However, the benefits depend on the liquidity of the direct rupiah-SGD market and the pricing offered by banks. Companies should conduct a cost-benefit analysis before switching.
Risks / Unknowns
- Market depth: The direct rupiah-SGD market may be thin initially, leading to wider spreads.
- Regulatory changes: The framework is subject to further guidance from BI and MAS.
- Bank readiness: Not all banks may offer full LCT services immediately, despite being appointed.
- Hedging availability: Forward markets for rupiah-SGD may be limited, affecting risk management.
FY Outlook
The LCT framework is expected to deepen over time as more transactions are settled in local currencies. Traders should monitor the development of direct quotations and hedging products. The next 12 months will be critical in determining the practical benefits.
Conclusion
The operationalisation of the Indonesia-Singapore LCT framework is a significant development for cross-border traders. By understanding the appointed banks, FX implications, and setup steps, businesses can position themselves to benefit from reduced currency conversion costs and more efficient settlement. However, careful assessment of market conditions and bank capabilities is essential.
Source Notes
- Bank Indonesia and MAS operationalise LCT framework: BI news release
- List of appointed banks: Antara News
