Jakarta. Indonesia’s Islamic banking sector is on track for its strongest year ever, with total assets surpassing Rp 1,028 trillion ($65 billion) as of October 2025 -- the highest level since the industry was established, according to the country’s Financial Services Authority (OJK).

Dian Ediana Rae, OJK’s Chief Executive for Banking Supervision, said the 11.34 percent year-on-year asset growth reflects “a remarkable achievement” and signals that Indonesia’s long-term roadmap for expanding Islamic finance is beginning to deliver results.

Financing and third-party funds (DPK) also reached record highs. Islamic bank financing rose 7.78 percent to Rp 685.55 trillion, while deposits climbed 14.26 percent to Rp 820.79 trillion -- both the highest figures ever recorded in Indonesia’s Sharia banking history.

“These achievements show that the direction of Islamic banking development is firmly on the right track,” Dian said in a statement on Friday.

OJK is now accelerating structural reforms, including the mandatory spin-off of large Sharia units and further consolidation among Islamic banks. The regulator states that most standalone Islamic commercial banks still fall under the smallest KBMI 1 category, limiting their scale and competitiveness.

A larger economic base, Dian said, would enable Islamic banks to expand financing, build more innovative business models, improve efficiency, and strengthen technology infrastructure and human capital.

Indonesia recently saw a major milestone in this policy shift: state-owned Bank Tabungan Negara (BTN) completed the spin-off of its Sharia unit, launching Bank Syariah Nasional in place of the acquired Bank Victoria Syariah earlier this year.

With competition in the broader banking industry intensifying, OJK is urging Islamic banks to become more agile by leveraging the unique characteristics of Sharia-compliant products, deepening collaboration with parent banks, and optimizing Islamic social finance instruments such as zakat, waqf, and sadaqah.

“These strategies are expected to strengthen the identity of Islamic banking as a sector focused on socio-economic development and broaden financial inclusion for all segments of society,” Dian said.

Indonesia, home to the world’s largest Muslim population, has long aimed to elevate its Islamic finance industry to match regional leaders such as Malaysia. Despite rapid growth in recent years, Sharia banks still hold only around 7 percent of national banking assets -- a gap regulators hope to narrow through scale, consolidation, and product innovation.