Treasurers said many cash-strapped banks had offered higher rates than advertised in attempts to lock in depositors' funds. The central bank said it would not guarantee depositors' savings placed at rates higher than the maximum rate allowed. The bank set the interest rate ceiling for depositors' savings based on average deposit rates of banks picked by Bank Indonesia one week in advance plus a margin of 500 basis points for rupiah and 100 basis points for dollars.

The selected banks are contributing to the Jakarta interbank offered rates (Jibor). Jibor is updated everyday at 0400 GMT. The central bank also set a ceiling for interbank rates. It said the government would onlyguarantee principal payments and interest rates at the ceiling set by the central bank although banks are allowed to set their own rates.

Currency dealers said interbank rates had been pretty mixed in the money market depending on banks' names and status. On Monday, overnight money rates for foreign and state banks hovered between 15 and 20 per cent while the rates for reputable local banks and state banks ranged around 50 per cent.

But overnight rates were above 50 per cent for small and doubtful names.The central bank said the ceiling for interbank rate was based on the weighted average of overnight rates from banks contributing to the Jakarta interbank offered rates selected by the central bank.

The bank will announce rupiah and dollar ceilings for depositors' savings and interbank rates every Friday afternoon and they will be valid for the following week. If the Friday falls on a public holiday, the bank would announce it on the following working day and the bank reserved the right to makeannouncements on any other days, it added.

Interest rate ceilings for depositors' funds were previously set at 125 per cent of the underlying central bank certificates (SBIs).

The central bank on Monday announced the first implementation of the new ruling with the following rates effective from June 1 to June 7. Bank Indonesia set a maximum rate for one-month deposits at 63 per cent, three months at 49 per cent, six months at 39 per cent, 12 months at 38 per cent and 24 months at 30 per cent.

The bank set the one-month rate for dollar deposits at 15 per cent, three months at 14 per cent, six months at 13 per cent, 12 months at 13 per cent and 24 months at 15 per cent.

The bank also set maximum interbank rates of 58 per cent for rupiah and 28 per cent for dollars.