The pace of deposit rate cuts accelerates among small and medium-sized banks

● Our reporter Shi Shiyu

Since April, many city commercial banks and rural commercial banks have intensively lowered deposit interest rates. Specifically, the adjustment range covers mainstream products such as fixed deposits and notice deposits, with rate cuts ranging from a few to dozens of basis points, and the pace of rate reductions has significantly accelerated.

In recent years, the deposit cost rates of regional small and medium-sized banks have decreased year by year, and net interest margins have gradually stabilized. Some banks’ deposit cost rates for 2025 have already fallen into the “1” range, with further increases in year-on-year reductions. Several industry insiders analyze that currently, the banking industry’s net interest margin is at a historic low, and future deposit rate adjustments may continue to be small, gradual, and structurally differentiated, with the rate center still steadily moving downward.

Faster frequency of reductions

Many regional small and medium-sized banks’ deposit cost rates have decreased annually. As of April 6, among seven regional banks that have disclosed their 2025 annual reports, six have deposit cost rates entering the “1” range, including Zhangjiagang Bank and Qingdao Bank, with reductions of over 30 basis points compared to 2024, and further increased year-on-year decreases.

According to incomplete statistics by the reporter, since late March, over 30 small and medium-sized banks have lowered deposit interest rates, with many banks accelerating the frequency of rate cuts.

Jilin Bank adjusted its deposit listing rates starting April 1, just one month after its last adjustment. The three-year fixed deposit listing rate was lowered from 1.75% to 1.70%, a decrease of 5 basis points.

Xiamen Bank also recently announced a rate adjustment. Starting April 1, the one-day notice deposit and seven-day notice deposit listing rates were lowered to 0.6% and 0.9%, respectively, both down by 5 basis points. Notably, on March 27, the bank had already lowered deposit rates once, reducing the one-year, three-year, and five-year fixed deposit rates by 10, 20, and 20 basis points, respectively.

Nanjing Pukou Jingfa Village Bank has lowered fixed deposit rates twice since March. On March 9, the one-year deposit rate was adjusted from 1.85% to 1.65%, and the two-year deposit rate from 1.8% to 1.65%; on March 20, the one-year deposit rate was further lowered to 1.5%, and the two-year deposit rate to 1.47%.

Return to cost optimization goals

Many small and medium-sized banks have canceled previous preferential rates, leading to rate reductions. For example, Huixian Pearl River Village Bank implemented a new rate policy starting April 2. Compared to late January this year, the bank lowered the six-month and five-year deposit rates by 15 and 25 basis points, respectively, and canceled the tiered interest calculation for one-year, two-year, and three-year deposits. After adjustment, the rates for one-year, two-year, and three-year deposits were lowered by 30, 27, and 13 basis points from the previous maximum rates for those terms.

Similarly, Luoning Rural Commercial Bank did not adjust listing rates but changed preferential deposit rates for deposits of 10k yuan (inclusive) or more. The bank canceled the preferential rate for five-year deposits, and the rates for three-month, six-month, one-year, two-year, and three-year deposits were lowered by 23, 23, 25, 22, and 15 basis points compared to January this year.

“A recent reduction in deposit interest rates by some banks is to bring the preferential rates that were inflated during the ‘Opening Red’ campaign back to normal levels,” said a retail business manager at a city commercial bank in North China. “Some small and medium-sized banks temporarily raised deposit rates to boost short-term deposit growth. After the ‘Opening Red’ campaign ends, banks return to the goal of managing net interest margins and optimizing long-term liability costs.”

Long-term deposit rates still have room to fall

Industry insiders believe that the overall net interest margin of the banking industry is at a historic low, and the main purpose of small and medium-sized banks lowering deposit rates is to reduce liability costs and stabilize net interest margins.

According to Wang Pengbo, chief analyst at Broadcom Consulting for the financial industry, future deposit rate adjustments will continue to be small, gradual, and structurally differentiated, with the rate center still steadily moving downward. Long-term deposit rates still have room to decline, and banks’ liability structures will gradually tilt toward medium and short-term.

Data disclosed by the National Financial Regulatory Administration shows that in 2025, the net interest margins of city commercial banks and rural commercial banks will stabilize significantly: city commercial banks’ net interest margin remains at 1.37% across four quarters, while rural commercial banks’ net interest margin stays at 1.58% in the first to third quarters, rising by 2 basis points quarter-on-quarter in the fourth quarter.