The Financial Services Authority (OJK) aims for five Islamic banks to approach the business scale of Bank Syariah Indonesia (BSI) by 2027, Indonesia Business Post reported.

Islamic banks that remain small after a spin-off would be expected to consolidate.

Dian Ediana Rae, OJK’s Banking Supervision Executive Head, said progress towards the goal is already being made.

He indicated that the target could be achieved in 2026, or by 2027 at the latest.

His remarks followed the launch of the Roadmap for the Development and Strengthening of Indonesian Banking (RP3I) in Bali.

Dian noted that larger Islamic banks could be formed in several ways. These include converting a conventional bank fully into an Islamic bank and separating a lender’s Islamic business unit into a standalone Islamic bank.

OJK also highlighted the importance of building up the scale of banks formed through spin-offs.

Where a spin-off yields a bank of limited size, Dian said OJK would require it to merge with another bank.

Featured image: Edited by Fintech News Indonesia, based on image by OJK via its website and atlascompany via Magnific.