Demand Deposits Increase Again... High-Interest Parking Accounts Attract Attention

As expectations grow that deposit interest rates will continue to rise for the time being, demand deposits in the banking sector are surging. Naturally, 'parking accounts' that offer relatively high interest rates while allowing temporary deposits of lump sums are also gaining attention.

According to the financial sector on the 15th, the balance of demand deposits at the five major domestic banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) stood at 608.1349 trillion won at the end of last month. This marks an increase of 10.1698 trillion won from the previous month, surpassing 600 trillion won again.

Demand deposits refer to deposits that can be withdrawn at any time, like regular checking accounts in banks. Although the interest rates are generally low, around 0.1?2%, the advantage lies in the ability to manage funds flexibly since deposits can be deposited or withdrawn at any time. This is why they are often called 'investment standby funds.'

The recent increase in demand deposits amid sluggish stock and real estate markets is attributed to the recent trend in deposit interest rates. Since the 'Legoland incident,' in the fourth quarter of last year, as the maturities of high-interest time deposits and other deposit products attracted by financial institutions have come due, deposit interest rates have been rising to re-attract these funds. The prolonged high-interest rate stance signaled by central banks such as the U.S. Federal Reserve (Fed) is also cited as a cause.

In fact, deposit interest rates at banks and other financial institutions are gradually rising. The 12-month fixed deposit interest rates at the five major domestic banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) have exceeded 4%, ranging from 4.00% to 4.05%. This is an increase of 0.20?0.32% on both the upper and lower ends compared to early last month (3.68?3.85%). For savings banks, the average 12-month fixed deposit interest rate as of this day is 4.23%, up 0.12 percentage points from early last month (4.11%).

With growing expectations that deposit interest rates will rise for the time being, 'parking accounts,' which had not been in the spotlight for a while, are gaining attention again. Interest in demand deposit accounts offering relatively high interest rates is increasing, either to receive higher fixed deposit interest rates or to wait for a recovery in the stock and real estate markets.

Financial institutions are actively launching related products. Since demand deposit accounts have lower funding costs compared to fixed deposits, they are key deposits for financial institutions to maintain profitability. Savings banks, which have no other means of attracting deposits, are particularly proactive.

OK Savings Bank’s parking account product, OK Utbaekman Account II, offers up to 5% annual interest. Specifically, it provides up to 5% for balances up to 1 million won, up to 4% for balances over 1 million won up to 5 million won, and 3.5% for balances exceeding 5 million won. Daol Savings Bank’s 'FI Connect Account' and DB Savings Bank’s 'M-Dream Big Parking Account' offer up to 4% annual interest for balances up to 20 million won and 50 million won, respectively.

There are also products that apply high interest rates even for large deposits. NH Savings Bank offers up to 3.8% annual interest on the 'NH FIC-One Regular Deposit' for deposits up to 100 million won, and SBI Savings Bank applies 3.5% annual interest on the 'Cider Bank Demand Deposit Account' for deposits up to 100 million won. An industry insider said, "While it is true that competition to re-attract deposits is underway, it is difficult for high-interest deposit products exceeding 5?6% like those at the end of last year to appear," adding, "Since it is hard to predict the timing of a rebound in the stock and real estate markets, many funds are expected to remain cautious for the time being."