Savings Banks 'Loading Ammunition'... Gradual Increases in Deposit and Savings Interest Rates

Declining Deposit Rates at Commercial Banks, Savings Banks Raise Rates
SBI and Sangsangin Fixed Deposits at 3.9%... Installment Savings Reach 10% Range
"Securing Deposit Balances Ahead of Expected Rate Cuts in Second Half"

While commercial banks are lowering their deposit interest rates, the savings bank industry is showing a contrasting trend by raising interest rates on major savings and time deposit products. This is interpreted as a strategy to secure deposits in order to activate loan operations amid growing expectations of a base rate cut.

According to the financial sector on the 26th, SBI Savings Bank newly established a 9-month maturity segment for its time deposit products on the 22nd. The 9-month time deposit product offers the same annual interest rate of 3.7~3.8% as the existing 12-month maturity product. On the 19th, SBI Savings Bank also raised its deposit interest rate by 0.3 percentage points to enhance competitiveness. SBI Savings Bank’s 12-month revolving time deposit offers an annual interest rate of 3.9%.

According to the Savings Banks Association consumer portal, OSB Savings Bank also raised its 12-month deposit interest rate by 0.2 percentage points to 3.9% on the 21st. Sangsangin Savings Bank increased its deposit interest rate from 3.7% to 3.81%, a 0.11 percentage point rise, and Welcome Savings Bank also raised its deposit interest rate from 3.7% to 3.75%, a 0.05 percentage point increase.

[Image source=Yonhap News]

The savings bank industry is also launching high-interest installment savings products offering interest rates in the double digits. A큐온 Savings Bank introduced the ‘Nanali Savings (100 days)’ product, which offers a maximum annual interest rate of 12%. The base interest rate is 2% per annum, and a preferential interest rate of 0.1 percentage points is provided once daily each time a deposit is made. If a total preferential interest rate of 10 percentage points is applied over 100 days until maturity, the maximum annual interest rate of 12% can be received.

Welcome Savings Bank, in collaboration with Lotte Card, launched the ‘Welcome DigiRoca 100-day Savings’ product offering a maximum annual interest rate of 10%. Preferential interest rates are applied each time savings are accumulated through the Lotte Card application (app). The base interest rate is 0.2% per annum, but with preferential interest rates up to 9.8 percentage points, customers can receive a maximum annual interest rate of 10%.

This increase in deposit interest rates is the exact opposite of the trend in the banking sector, where deposit interest rates are being lowered. According to the Bankers Association consumer portal on the 22nd, the five major banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) offer base interest rates of 2.5~3.4% per annum on 12-month time deposits. Recently, NH Nonghyup Bank lowered interest rates on major deposit products by 0.35 percentage points, and Kookmin Bank and Shinhan Bank also reduced interest rates on some deposit products by 0.2 percentage points. This is due to the decline in market interest rates, such as bank bonds, which serve as the basis for calculating bank time deposit rates.

Unlike the banking sector, the savings banks’ recent increase in interest rates on savings and time deposit products is seen by the savings bank industry as aimed at expanding loan handling. A representative from the savings bank industry said, “The biggest purpose of funding is operation,” adding, “It seems there is a mood to revive the loan business of savings banks, which has been sluggish for some time.”

Another savings bank official explained, “There is a high probability that the base rate will be cut in the second half of this year, and if interest rates fall, customers will have more capacity for new loans,” adding, “If savings banks start funding after the interest rate cut, it will be too late. They are trying to secure deposit balances in advance starting now.”