The Reason Why You Get a 1% Preferential Interest Rate Just by Salary Transfer

Accelerated Core Deposit Outflow in Banking Sector
‘Salary Transfer’ Added to Youth Leap Account Preferential Interest Items
Securing Core Deposits for Low-Cost Fundraising Purposes

The banking sector is stepping up efforts to prevent the continued outflow of core deposits. The inclusion of 'salary transfer' as a condition for preferential interest rates in the Youth Leap Account launched on the 15th is also interpreted as a measure to secure core deposits.

According to the financial sector on the 18th, the demand deposit balance of the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup Bank) stood at 585.4546 trillion won as of last month. This represents a decrease of 5.5257 trillion won compared to the previous month (590.9803 trillion won) and is 118.1577 trillion won lower than the same period last year (703.6123 trillion won). The demand deposit balances of these banks showed a brief increase at the beginning of this year but then sharply declined from 598.2682 trillion won in March to 590.9803 trillion won in April.

The trend is similar for corporate customers' Money Market Deposit Accounts (MMDA). The MMDA balance of the five major banks was 106.0106 trillion won last month, continuing a downward trend from 115.9762 trillion won in March to 111.6452 trillion won in April.

Demand deposits are deposits that allow free withdrawals and deposits, with typical examples including regular deposits, salary accounts, and MMDAs. From the banks' perspective, these are core deposits or low-cost deposits because they can raise funds at low interest rates of 0.1% to 0.3% per annum. They play a role in reducing funding costs, directly impacting banks' net interest margin (NIM), in other words, profitability. This is why banks focus on marketing salary accounts and securing local government treasury bank contracts.

The appearance of 'salary transfer' as a preferential interest rate condition in the Youth Leap Account launched on the 15th is understood to be influenced by this background. The five major commercial banks and ten banks including Industrial Bank of Korea, Busan, Gwangju, Jeonbuk, and Gyeongnam offer preferential interest rates ranging from 0.3% to 1.0% when salary transfers are made to their banks. In the case of Woori Bank, customers can receive the maximum preferential interest rate of 1.0% simply by transferring their salary, without other conditions such as card usage or first-time transactions. The minimum transfer amount and transfer maintenance period required by the ten banks are generally over 500,000 won per month and 30 to 36 months, respectively.

An official from a commercial bank explained, "The inclusion of salary transfer as a key preferential interest rate condition in the Youth Leap Account is due to the expectation of securing core deposits, attracting customers for long-term transactions, and the potential for additional financial transactions."