Ahead of Interest Rate Cut... Regular Savings and Time Deposits Balance Soars to 17 Trillion Won

As of July 30, Deposit and Savings Balance at 943 Trillion Won

During the month of July, the balance of fixed-term deposits and installment savings at major commercial banks increased by more than 17 trillion won. This was due to last-minute demand for high-interest deposit products as the possibility of interest rate cuts by central banks such as the U.S. Federal Reserve (Fed) and the Bank of Korea in the second half of the year grew.

According to the financial sector on the 1st, as of the 30th of last month, the balance of fixed-term deposits and installment savings at the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) was recorded at 943.3911 trillion won. This is an increase of 17.6303 trillion won (1.90%) compared to the end of the previous month (925.7608 trillion won).

Looking at the details, the balance of fixed-term deposits reached 907.6473 trillion won, up 16.4949 trillion won (1.85%) from the previous month (891.1524 trillion won). The balance of installment savings also increased by 1.1354 trillion won (3.28%) from the previous month (34.6084 trillion won) to 35.7438 trillion won.

This increase in fixed-term deposits and installment savings is the second highest since May this year (17.8544 trillion won). The monthly increases in fixed-term deposits and installment savings this year were ▲January 13.9472 trillion won ▲February 10.3644 trillion won ▲March -14.7217 trillion won ▲April 0.5862 trillion won ▲May 17.8544 trillion won ▲June 2.5714 trillion won.

The reason for the significant increase in fixed-term deposits and installment savings last month is attributed to the possibility of interest rate cuts in the second half of the year. As rate cuts are expected, financial consumers are increasing their fixed-term deposits and installment savings to receive relatively higher interest rates.

At the Bank of Korea's Monetary Policy Committee regular meeting last month, the base rate was unanimously held steady at 3.5%, but two committee members suggested keeping the door open for a rate cut in three months, indicating a potential policy shift. The market also sees the Fed possibly starting rate cuts from September.

Expectations of interest rate cuts have already been reflected in the bond market. The one-year bank bond rate, which serves as the benchmark for fixed-term deposits, was 3.706% at the beginning of this year but fell to 3.304% as of the 29th of last month. The interest rates on major fixed-term deposit products at the five major commercial banks were also between 3.35% and 3.45% as of the previous day, below the Bank of Korea's base rate (3.50%).

A banking industry official said, "During July, low-cost deposits generally decreased sharply, while fixed-term deposits and installment savings increased significantly," adding, "This is interpreted as a move to enjoy relatively high interest rate benefits ahead of the expected rate cuts in the second half of the year."