Jakarta, July 29 -- The Indonesian government plans to use part of its state budget surplus to support grassroots economic development by injecting capital into Red and White Village Cooperatives.

Finance Minister Sri Mulyani Indrawati said that the funds, held by Bank Indonesia, will be used to provide low-interest loans to the cooperatives through four state-owned banks, namely BNI, BRI, Mandiri, and BSI.

Using the surplus will ensure the capital injection does not affect banking sector liquidity, she explained at the Financial System Stability Committee (KSSK) press conference here on Monday.

The banks will offer productive loans, with interest rate capped at 6 percent, repayment tenors of up to six years, and grace periods ranging ...