Small and medium-sized banks intensively cut deposit interest rates, with deposit rates generally dropping to single-digit percentages

【Source: Global Network】

【Global Network Finance and Economics, Comprehensive Report】Recently, small and medium-sized banks have entered a new round of deposit interest rate adjustments. Since late March, small and medium-sized banks in multiple regions, including Jiangsu, Jilin, Fujian, and Sichuan, have successively lowered their deposit benchmark rates. Medium- to long-term time deposit rates such as those for three-year and five-year terms have generally fallen to “1” range; in some banks, an “inversion” phenomenon in interest rates between long and short terms has appeared.

Xishang Bank stated that effective April 1, the bank will adjust the interest rates on certain deposits in its mobile banking app. The three-year and five-year time deposit rates will both be adjusted to 1.8%, which is a reduction of 20 basis points compared with the current rates.

Jiangsu Nanjing Pukou Jingfa Rural Bank has cut deposit rates for the second consecutive time since March. On March 9, the bank adjusted its one-year deposit rate from 1.85% to 1.65%, and its two-year deposit rate from 1.8% to 1.65%. On March 20, the bank lowered the rates again: the one-year deposit rate fell to 1.5%, and the two-year deposit rate fell to 1.47%.

In terms of the scope of the adjustments, medium- and long-term products have become the focus of this round. Several banks have reduced three-year and five-year deposit rates by relatively significant margins. In some banks, deposit interest rates across different terms have basically leveled off, and in some cases an inversion has occurred—meaning the long-term deposit interest rate is lower than the short-term deposit interest rate.

It is worth noting that some banks have adopted differentiated adjustment strategies for deposit interest rates across different terms, achieving a structural adjustment of “some increases and some decreases.” Industry insiders believe that this kind of adjustment approach helps banks optimize their liability structure and control funding costs.

In addition to personal time deposit rates, several banks have simultaneously lowered their unit deposit benchmark rates. Fujian Huatong Bank said in a notice released earlier that effective March 27, the bank’s benchmark interest rates for three-month, six-month, and one-year time deposits for units will be lowered to 1.3%, 1.5%, and 1.6%, respectively.

Analysts point out that the intensive downward adjustments to deposit interest rates by small and medium-sized banks in this round are follow-up moves after earlier multiple reductions by state-owned large banks and joint-stock banks. Against the backdrop of sustained declines in lending rates, pressure on banks’ net interest margin has increased, and proactively reducing liability costs has become the common choice for banks. (Sailor)