Savings Banks with Accelerated Deposit Withdrawals, Deposit Interest Rates Return to 4% Range

Average Annual 4.0% as of the 11th
Deposit Balance Decreases by 2 Trillion Won Monthly

Savings bank deposit interest rates have risen back to the 4% range annually after four months. This move aims to prevent funds from flowing out to commercial banks by raising deposit interest rates.

According to the Korea Federation of Savings Banks on the 11th, the average deposit interest rate of all 79 savings banks as of that day was 4.0% per annum (based on a 12-month maturity). OK Savings Bank's ‘OK e-Anshim App Plus Time Deposit’ had the highest rate at 4.51% per annum, followed by JT Savings Bank’s ‘Rotating Time Deposit’ at 4.45%, Sangsangin Plus Savings Bank’s ‘Rotating Time Deposit’ at 4.43%, and Sangsangin Savings Bank’s ‘BangBangBang Rotating Time Deposit’ at 4.40%. In addition, major savings banks such as Yegaram, OSB, Kiwoom, Daeshin, and JT Chinhae also offered time deposits with interest rates above 4%, raising the industry average.

The average deposit interest rate of savings banks hitting the 4% range is the first time in four months. After dropping below 4% to 3.99% on February 17 this year, it hovered in the mid-to-high 3% range until early this month. Savings bank deposit interest rates peaked at 6% annually in November and December last year but have shown a steep decline this year.

The industry is raising deposit interest rates again to prevent deposit outflows. Recently, concerns about the industry have increased, and the competitiveness of interest rates compared to commercial banks has weakened, causing savings bank deposits to decline rapidly. According to the Bank of Korea, the balance of savings bank deposits (based on month-end) has decreased by about 2 trillion KRW each month: 120.7854 trillion KRW in January, 118.9529 trillion KRW in February, and 116.071 trillion KRW in March this year.

On the other hand, funds seem to be flowing into the banking sector. As of the end of last month, the total balance of time deposits at the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) was approximately 817.6 trillion KRW, an increase of 12 trillion KRW compared to the previous month (about 805.8 trillion KRW). This is due to increased interest in safe assets and the halt in the decline of deposit interest rates. As of this day, the time deposit interest rates at the five major commercial banks are around 3.5?3.8% annually (based on a 12-month maturity), which is not significantly different from savings bank time deposit rates. Typically, savings banks maintain deposit interest rates about 1 percentage point higher than commercial banks, so the interest rate appeal is not strong.

[Image source=Yonhap News]

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