The deposit balance at savings banks has fallen below 100 trillion won for the first time in eight months. Analysts attribute the continued decline in deposits to the decreasing appeal of interest rates, with deposit rates dropping to the 2% range.
According to the Bank of Korea's Economic Statistics System on May 15, the outstanding balance of deposits at mutual savings banks as of the end of March stood at 99.5873 trillion won, falling below the 100 trillion won mark for the first time in eight months since July of last year (99.9128 trillion won).
The deposit balance at savings banks reached 103.5989 trillion won in October last year but has been on a downward trend for five consecutive months since November. Considering that the balance surpassed 120 trillion won at the end of 2022, when high-interest products were popular, the recent scale of deposits has contracted significantly.
At the end of 2022, the savings bank sector introduced deposit products with annual interest rates in the mid-6% range, attracting significant funds and gaining attention as a representative investment destination for the so-called 'Ye-Tech' (Yegeum + Tech, or deposit + financial technology) demographic.
However, the current level of interest rates offers little advantage even compared to commercial banks.
According to the Korea Federation of Savings Banks, as of this day, the average annual interest rate for six-month fixed deposits at 79 domestic savings banks is 2.58%. The average annual rate for 12-month fixed deposits is 2.96%. The ongoing inability to expand lending or engage in aggressive business activities due to the impact of defaults on real estate project financing (PF) loans has been identified as a cause.
However, there are projections that if the deposit insurance limit across all financial institutions is raised from 50 million won to 100 million won on September 1, there could be a 'shift of funds' to the secondary financial sector.
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