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[Asia Economy Reporter Kangwook Cho] It has been revealed that the time deposits of the five major commercial banks surged by about 1 trillion won last month. This marks the first increase in five months since the outbreak of the novel coronavirus disease (COVID-19). Despite the fact that deposit products with interest rates in the 0% range account for more than 70% of all products, the recent signs of a COVID-19 resurgence have heightened concerns about economic uncertainty, leading to an expanded preference for safe assets.

According to the financial sector on the 3rd, the balance of time deposits at the five major commercial banks?KB Kookmin, Shinhan, Woori, Hana, and NH Nonghyup?was recorded at 628.6202 trillion won last month. This is an increase of 954.7 billion won (0.15%) compared to the previous month (627.6655 trillion won).

The balance of time deposits at the five major banks had shown a continuous decline for four months after reaching 652.3277 trillion won in March. The decrease accelerated, with a drop of 2.7079 trillion won in April and 5.8499 trillion won in May, and especially in June (10.6785 trillion won), an abnormal phenomenon occurred where over 10 trillion won was withdrawn in just one month. In July, when COVID-19 somewhat subsided, the decrease narrowed to 5.4259 trillion won compared to the previous month, but still exceeded 5 trillion won, indicating a decline in the attractiveness of time deposits.

As bank deposit interest rates fell to the 0% range and the low-interest rate trend deepened, the appeal in terms of interest diminished. Additionally, the acceleration of the economic downturn due to COVID-19 reduced the surplus funds available to be kept in time deposits compared to before. The 'debt investment (debt-financed investment)' craze, where loans are taken out to invest in stocks, also played a role.

In fact, the current average interest rate on time deposits at the five major commercial banks is about 0.9% per annum, which is 0.75 percentage points lower than the same period last year (1.65% per annum). According to the Financial Supervisory Service's integrated financial product comparison disclosure site, 'Financial Products at a Glance,' as of this date, among 51 time deposit products offered by 21 domestic banks, the proportion of products with interest rates in the 0% range has rapidly increased to 72.5% from less than 5% at the beginning of the year.

Among products with a one-year maturity, Hana Bank's 'Little Big Time Deposit' offered the highest interest rate at 1.3% per annum. This was followed by 'Hana One Q Time Deposit' (1.20% per annum) and 'Main Transaction Time Deposit' (1.15% per annum). NH Nonghyup Bank and Shinhan Bank offered products barely reaching 1%, while KB Kookmin Bank and Woori Bank had no time deposit products exceeding 1%. Even Hana Bank's Little Big Time Deposit has a base interest rate of only 0.5% per annum, so excluding preferential rates, it is effectively a 0% range deposit product.

However, despite such ultra-low interest rates, the fact that time deposits turned to an increasing trend last month after five months clearly reflects concerns that the economic situation may worsen in the future. In particular, the increase in time deposits was more pronounced among corporations than individuals. According to a recent business outlook survey conducted by the Korea Federation of SMEs targeting 3,150 small and medium-sized enterprises, the September Business Outlook Index (SBHI) was 67.9, down 3.0 points from the previous month. Compared to the same month last year, it dropped by as much as 15.3 points.

An official from a commercial bank said, "Even though deposit interest rates are at historically low levels, time deposits, especially from corporations, have increased," adding, "As the business outlook for small and medium-sized enterprises has turned downward again after four months and economic uncertainty has increased, it appears that funds are being tied up in safe assets like time deposits instead of investments."

This content was produced with the assistance of AI translation services.