BANKING INSTITUTION IN INDONESIA

Banks are special and therefore must run business based on prudential principles. The functions of banks in Indonesia are basically as financial intermediary that take deposits from surplus units and channel financing to deficit units. According to Indonesian banking law, Indonesian banking institutions are typically classified into commercial and rural banks. Commercial banks differ with rural banks in the sense that the latter do not involve directly in payment system and have restricted operational area. In term of operational definition, bank in Indonesia are classified into non-syariah and syariah-based principles commercial banks

Credit unions have the responsibility to their members to run daily operations in a responsible manner that protects member deposits and the integrity of the institution. Best practices in operational standards include adherence to generally accepted accounting principles, transparency in accounting and operations and implementation of internal control policies and procedures that protect the institution against employee and member risk. Financial management standards are critical to the operations of a credit union so that managers and directors can set a plan for the financial operations of an institution and monitor progress against that plan.