If confirmed, the two Chinese banks would compete with Bank Mandiri, Indonesia's largest bank by assets, for Temasek's shares in BII, reported English-language daily The Jakarta Post.

    "We received their proposals last week, but we haven't decided anything. We are still studying the proposals," Bank Indonesia Director for Research and Banking Administration Halim Alamsyah was quoted as saying.

    He said the central bank had no reservations about accepting the proposal from the foreign banks.

    "We always encourage banks to launch mergers and acquisitions to strengthen their assets. We will simplify the merger and acquisition regulations so the process can move faster," he said.