Sunway University Business School’s Professor of Economics Dr Yeah Kim Leng said this was due to the fact that Malaysian banks, which are currently facing regulatory restrictions in Indonesia, would finally be in an optimum position for development.

“At the same time, Indonesian banks here will be able to provide a healthy challenge to the local banks.

“However, local banks may feel the effects, over the long term, if millions of Indonesians here decide to use their own national banks,” he told FMT.

The Bank Negara Malaysia Monetary Policy Committee member also described the venture as a significant progress in the joint framework of both countries’ banking institutions.

“It is an exchange method (where both parties gain advantages and competition). However, as a whole, it would benefit both parties,” added the former RAM Holdings Berhad chief economist.

On Monday, Indonesia’s financial regulators Otoritas Jasa Keuangan (OJK) and Bank Negara Malaysia signed the Asean Banking Integration Framework, a bilateral agreement that allows for three banks to open branches in both countries.

Two Indonesian banks, government-owned Bank Mandiri and Bank Rakyat Indonesia, are planning to open branches here soon.

Meanwhile, Malaysian banks CIMB and Maybank are operating in Indonesia.