Savings Banks Raising Deposit Rates... Following Base Rate and Meeting Loan-to-Deposit Ratio

[Asia Economy Reporter Song Seung-seop] Due to the impact of the base interest rate hike, savings banks' deposit interest rates are rising consecutively. Temporary liquidity, unable to find investment destinations, is expected to flow into savings banks offering even slightly higher interest rates.

According to the Korea Federation of Savings Banks on the 20th, the average interest rate for 12-month fixed deposits at 79 savings banks is 2.23% (as of the 18th). This is an increase of more than 0.1 percentage points in less than a month from 2.12% at the end of August. Compared to the beginning of this year (1.89%) or a year ago (1.73%), the upward trend is even more pronounced.

Savings deposit interest rates also continued to rise, recording 2.42% (12 months). Products with a 36-month maturity reach 2.50%. At the beginning of this year, the interest rate for 1-year fixed savings deposits was about 2.38%.

The interest rate hikes in the industry are led by large savings banks. SBI Savings Bank announced on the 1st of this month that it would raise deposit interest rates by 0.3 percentage points. Fixed deposits, flexible installment deposits, ‘SBI Special Fixed Deposit’, and ‘ISA Fixed Deposit’ sold by SBI Savings Bank and Cider Bank are subject to this. The interest rate for 1-year fixed deposits increased from 2.20% to 2.50%, with Cider Bank raising it up to 2.6%.

OK Savings Bank also announced on the 17th that it would raise the interest rate for ‘OK Fixed Deposit’ products with maturities of 1 to 3 years from 2.2% to 2.5%. The 3-year product of the variable interest rate product ‘OK Safe Fixed Deposit’ was also adjusted from 2.3% to 2.6%. On the 8th, OK Savings Bank had also increased the special offer rate for ‘OK Eutshot Fixed Deposit’ by 1.3% to 2.5% with a limit of 200 billion KRW and raised some fixed deposit interest rates.

Welcome Savings Bank raised the interest rate for 1-year fixed deposits from 2.15% to 2.4% starting from the 7th. Customers who sign up through the company’s application ‘Welbang’ or online receive a preferential interest rate of 0.2 percentage points without conditions, applying a maximum interest rate of 2.6%.

The increase in deposit interest rates is a consequence of the Bank of Korea’s base interest rate hike. The Bank of Korea raised the base rate by 0.25 percentage points from 0.50% to 0.75% on the 26th of last month.

There is also the purpose of adjusting the loan-to-deposit ratio. The savings bank sector tends to secure deposits in advance as the end of the year approaches and fixed deposits mature.