Highest decrease of 40 basis points within the month! Several small and medium-sized banks cut deposit interest rates

At the end of the first quarter, small and medium-sized banks’ deposit rates have once again been cut.

Since March, many small and medium-sized banks in multiple regions—including Hubei, Xinjiang, and Jiangsu—have updated their deposit rate tables, announcing reductions to rates on multiple deposit products, with a single cut ranging from 5 to 35 basis points (BP).

A reporter from International Finance News noted that, in this round of adjustments, short-term time-deposit products with maturities of one year and below have become a key target for a number of banks. One institution has reduced deposit rates multiple times in March, and for some products, the cumulative cut within the month has reached as much as 40 basis points (BP).

Experts interviewed pointed out that small and medium-sized banks proactively lowering deposit rates helps reduce interest expenses and ease the problem of deposits becoming long-term, thereby stabilizing banks’ cost of liabilities. Looking ahead to 2026, pressure on banks’ net interest margins is expected to ease markedly; and for some small and medium-sized banks where deposit improvements are more pronounced, their margins may have already bottomed out and will stabilize.

A single cut as high as 35 basis points

Since last year, many local small and medium-sized banks have carried out multiple rounds of deposit rate cuts, mainly focusing on time-deposit products with terms of 3 years and 5 years. A reporter from International Finance News noted that, since this year, one-year and other short- to medium-term products have also undergone adjustments.

At midday on March 31, Jingling Rural Commercial Bank in Hubei released a notice titled “Notice on Adjusting Certain Deposit Rates,” stating that, according to the bank’s business and operational planning, starting from April 1, 2026, it would lower the deposit rate of its featured deposit product “Fu Manying” for the one-year term. A reporter from International Finance News looked up the details and found that this one-year product has two minimum investment thresholds: 50,000 yuan and 200,000 yuan. Previously, the rates were both 1.25%. This time, they were reduced by 10 and 5 BP, respectively, to 1.15% and 1.20%.

On March 26, Xinjiang Qitai Lifeng Rural Bank also issued an announcement on deposit rate adjustments, cutting rates for demand deposits, fixed-term time deposits with lump-sum principal and interest, notice deposits, and deposits with periodic installment withdrawals across the board.

The reporter noted that the bank’s demand deposit rate has been lowered from 0.16% to 0.08%. In addition, the fixed-term time-deposit rates for terms of 1 year, 2 years, and 3 years were each reduced by 30 BP; the 5-year lump-sum fixed-term time-deposit rate was lowered from 1.80% to 1.45%, a cut of 35 BP. In addition, one institution implemented three rounds of deposit rate reductions within the span of a month.

Nanjing Pukou Jingfa Rural Bank updated its time-deposit rates on March 2, March 9, and March 20, respectively. On March 2, it lowered the interest rates for unit and personal 3-year and 5-year deposits from 2.2% to 1.88%. On March 9, it lowered the interest rate for personal 1-year deposits from 1.85% to 1.65%; it lowered the interest rates for unit and personal 2-year deposits from 1.8% to 1.65%. On March 20, it lowered across the board the interest rates for personal and unit fixed-term deposits from 3 months to 5 years. The reporter noted that after the three rounds of cuts, the bank’s personal time-deposit products for 3-year and 5-year terms had a cumulative decline of 40 BP within the month.

“Proactively lowering deposit rates benefits small and medium-sized banks by reducing interest expense and alleviating the issue of deposits turning long-term, thereby stabilizing the bank’s cost of liabilities.” Shao Hui, an assistant professor at Zhejiang University International Business School (ZIBS), told reporters in an interview. “In response to the broader trend of interest rates continuing to fall, banks can also maintain net interest margin stability and sustain a sound development posture by optimizing the asset-liability structure, improving asset-side yield, developing non-interest income, and other measures.”

Year-over-year decline in net interest margin may narrow

Of particular note is that, judging from the latest deposit rate tables published by various banks, the medium- and long-term deposit rates of local small and medium-sized banks have already dropped into the “1”-handle range; compared with large banks, their interest-rate advantage is no longer as obvious as before.

Data from the National Financial Regulatory Administration show that, at the end of Q4 2025, commercial banks’ net interest margin remained at a historical low of 1.42%. By institution type, rural commercial banks’ net interest margin is slightly higher than that of state-owned banks, joint-stock banks, and city commercial banks. Over the past four quarters, the figures were 1.58%, 1.58%, 1.58%, and 1.60%, respectively, with a slight rebound at year-end. As of March this year, the LPR (loan prime rate) has remained unchanged for 10 consecutive months.

Ma Tingting, a bank-industry analyst at Guotai Junan Securities, predicted in a research report that net interest margin in the first quarter of 2026 will be 1.37%. The year-over-year decline in net interest margin is expected to significantly narrow, and the growth rate of net interest income in the first quarter of 2026 is expected to be 2.6%.

“Benefiting from repricing of high-cost long-maturity deposits upon maturity, LPR remaining unchanged during the period, new loan-disbursement rates staying stable, and the self-regulatory management of interbank deposit rates being expected to be further upgraded, banks’ net interest margin pressure will be significantly alleviated. Among them, in 2026, for small and medium-sized banks where deposit improvement is more pronounced, their net interest margins may have already bottomed out and will stabilize; with high growth in scale, they will show comparatively strong performance,” Ma Tingting said.

With deposit rates continuing to trend downward, small and medium-sized banks are also moving down from the “high interest rate” position. For individual savers with low risk appetite, how else can they allocate assets?

Shao Hui suggested that, in the face of the ongoing downward adjustment of deposit rates, investors should place more emphasis on diversified asset allocation when managing wealth to reduce the impact of yield fluctuations of a single asset. In addition to bank deposits, more prudent investors can also consider other wealth-management options such as government bonds, cash-management-type wealth products, and government bond reverse repos, to achieve steady capital appreciation.