Competition Among Banks for Special Savings and Time Deposit Offers During Interest Rate Hike Period

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[Asia Economy Reporter Minwoo Lee] Banks are competing to attract customers by offering higher interest rates on savings and time deposits. This appears to be a move to secure loan funds in advance.

According to the financial industry on the 9th, recently KB Kookmin, Shinhan, SC First Bank, and others have been offering limited-time savings and time deposit products with high interest rates. Shinhan Bank launched special products to celebrate its 40th anniversary, including the ‘Shinhan 40th Anniversary Festa Savings’ and the ‘Shinhan S Dream Time Deposit (40th Anniversary Thanks).’

The ‘Shinhan 40th Anniversary Festa Savings’ is a 10-month flexible savings account with weekly deposits. Depending on weekly deposit compliance, an annual interest rate of up to 4.0% is applied. Deposits of up to 300,000 KRW per month are allowed, and the product is limited to 100,000 accounts. Customers who consistently deposit are also eligible for cash-equivalent points through a lottery every 10 weeks.

KB Kookmin Bank also offers a time deposit product called ‘Group Purchase Time Deposit,’ which provides tiered interest rates based on sales volume. It is available in 6-month and 1-year terms and can be subscribed to through KB Kookmin Bank branches, customer centers, and KB Star Banking. The total subscription limit is 2 trillion KRW, and sales will end early once the limit is reached.

The minimum subscription amount is 1 million KRW, and the interest rate varies depending on the final sales amount and whether event rates apply. For a 1-year subscription period, if the final sales amount is 100 billion KRW or less, the annual interest rate is 2.60%, and if it exceeds 100 billion KRW, the rate is 2.70%. Additionally, customers who have no new (including reinvestment) time deposit history since July 1 of last year and subscribe with 10 million KRW or more will receive a preferential interest rate of 0.5 percentage points (p), resulting in a maximum annual rate of 3.20%.

Special products have also appeared for flexible savings accounts. SC First Bank’s ‘My Run Account No. 5’ is a representative example. It is a flexible savings account offering interest rates from 0.1% to 2.5% depending on the deposit period for each deposit, up to 6 months. The sales period is until the 22nd, with a sales limit of 200 billion KRW. Sales may end early if the limit is reached.

Consumers have already shown strong responses to these special offers. K Bank’s ‘CodeK Flexible Savings’ offering a 5% annual interest rate was sold out within ten days of its launch last month. Woori Bank’s ‘2022 Woori Special Time Deposit,’ with a maximum annual interest rate of 3.2%, also sold out its limit within six days of launch, prompting an additional increase of about 200 billion KRW.

This is interpreted as a strategy to more easily raise funds than bonds and use them for future loans. While household loans have decreased for six consecutive months this year, corporate loans, which have seen a relatively higher increase in interest rates, have surged, indicating efforts to attract funds in preparation for this. The outstanding corporate loans of the five major banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?reached 673.7551 trillion KRW last month, increasing by 37.0862 trillion KRW since the beginning of this year.

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