Five-year fixed deposits generally enter the 1% range, and the interest rate inversion has spread to small and medium-sized banks.

Source: 21st Century Business Herald | Author: Guo Congcong

Since the beginning of 2026, the deposit interest rates of small and medium-sized banks have traced an upside-then-down reversal curve.

Notably, during the “opening-for-the-year” period at the start of the year, in order to capture market share, many small and medium-sized banks temporarily raised their time deposit interest rates. However, since March, multiple small and medium-sized bank institutions—mainly rural commercial banks and town banks—have lowered their time deposit rates one after another. Five-year time deposits in particular have entered the “1”-handle era, while only a small number of institutions such as Panjin Bank have kept the corresponding rates above 2%.

Worth noting is that some banks have shown an interest rate inversion, where the five-year fixed deposit rate is the same as the three-year rate or even lower. For example, Harbin Youyi Rural Commercial Bank’s five-year fixed deposit rate is 1.6%, which is lower than its three-year rate of 1.75%.

In this round of deposit rate cuts, however, jumbo CD rates have displayed relatively strong “resilience to declines.” The rates are basically unchanged from the beginning of the year, and the product tenors show a clear shift toward shorter terms. One-year products are generally between 1.4% and 1.45%, and three-year products cluster around 1.8%. Only the issuance supply has slowed somewhat compared with the start of the year.

Has this interest rate reversal adjustment gone beyond market expectations? Can jumbo CDs “stand alone” during the rate-cutting wave? How will the “inversion” of rates reshape depositors’ behavior and banks’ liability structures? The reporter will combine the latest data and expert views to analyze the reasons behind small and medium-sized banks’ rate cuts and their likely future trend.

Small and medium-sized bank rates first rise, then fall

Since the beginning of 2026, small and medium-sized banks have traced an upside-then-down reversal curve in terms of deposit interest rate trends.

During the “opening-for-the-year” period at the start of the year, in order to capture market share, many small and medium-sized banks temporarily raised their time deposit interest rates. Several local banks, such as Lin County Rural Commercial Bank in Shanxi and Jiaxing Rural Commercial Bank in Zhejiang, among others, made modest increases of 10 to 20 basis points (i.e., 0.1% to 0.2%) to fixed deposit rates for certain tenors. It is worth noting that most of these rate hikes come with time limits—for example, Jiaxing Rural Commercial Bank in Zhejiang explicitly stated that the issuance period for this offering is from January 5, 2026 to March 31, 2026.

At that time, while state-owned big banks and joint-stock banks were shrinking their long-term deposit holdings, small and medium-sized banks, using this differentiated strategy, gained more initiative in the competition to attract deposits in the early part of the year.

But after entering March, multiple small and medium-sized bank institutions—mainly rural commercial banks and town banks—began cutting deposit rates one after another. For instance, Beiyin Town Bank of Shiping, Yunnan announced a comprehensive reduction for 3-month to 3-year terms. The three-month rate dropped from 1.10% to 0.80%, the six-month rate from 1.30% to 1.10%, the one-year rate from 1.60% to 1.55%, the two-year rate from 1.90% to 1.70%, and the three-year rate from 2.30% to 2.10%, with the cut ranging from 5 to 30 basis points.

Many small institutions, including Chiping Hulu Rural Commercial Town Bank and Liaoning Zhenxing Bank, have followed suit. In this round of adjustments, more banks’ five-year deposit rates fell below 2%, officially joining the “1”-handle group. For example, Nanjing Pukou Jingfa Town Bank announced that, starting March 2, the interest rates for unit and individual three-year and five-year fixed deposits would be lowered from 2.2% to 1.88%.

According to the reporter’s multi-party statistics from 21st Century Business Herald, the five-year fixed deposit rate has generally already entered the “1”-handle era. Only a few banks, such as Panjin Bank and Beiyin Town Bank of Shiping, Yunnan, still keep the five-year rate above 2%. Among them, Panjin Bank’s five-year fixed deposit rate is 2.05%; and Beiyin Town Bank of Shiping, Yunnan’s five-year fixed deposit rate is 2.1%.

Regarding this round of rate cuts by small and medium-sized banks, Lin Yingqi, general manager and banking analyst at CICC Research Department, analyzed that this round has seen rural commercial banks and town banks intensively lower deposit rates, with a concentrated pace and clearly defined magnitude. The decline is even more pronounced for long-tenor products, and five-year rates generally entering the “1” range is a market-oriented adjustment under pressure from controlling funding costs and compressing net interest margins.

Lin Yingqi said that the market is not surprised by this round of rate adjustments. “The ‘opening-for-the-year’ period at the beginning of the year saw temporary upward hikes, which were short-term deposit-attraction strategies. The rapid pullback after the holiday is a return to normal—actively reducing costs—which matches seasonal features and market expectations.”

In the short term, the “inversion” of rates will continue

In this round of deposit interest rate adjustments, a particularly noteworthy phenomenon is that in several banks, five-year deposit rates are aligned with three-year rates or even fall below the three-year rate, creating an “inversion.”

Taking Harbin Youyi Rural Commercial Bank as an example, its adjusted three-year fixed deposit rate is 1.75%, while its five-year rate is only 1.6%. For Shanghai Huarui Bank, after adjustment, the three-year rate is 2.00%, but the five-year rate drops to 1.95%.

In fact, before this round of interest rate adjustments by small and medium-sized banks, similar situations had already appeared at state-owned big banks. Currently, China Construction Bank’s highest three-year fixed deposit rate is 1.55%, while its five-year rate is only 1.30%; and for China CITIC Bank, both its three-year and five-year rates are 1.30%. Now, the “inversion” phenomenon has spread from big banks to small and medium-sized banks, drawing market attention: does this mean that rate “inversion” is becoming the norm?

In response, Lin Yingqi believes this signals that rate “inversion” is moving from isolated cases to a phase of semi-normalcy. “The core logic is that banks anticipate further rate declines and are unwilling to lock in long-term liabilities at high costs. They proactively reduce the use of long-tenor high-yield deposits.”

In fact, since 2025, with multiple LPR cuts and asset-side yield continuing to decline, pressure on banks’ net interest margins has intensified. Data from the National Financial Regulatory Administration shows that at the end of 2025, China’s commercial banks’ net interest margin was 1.42%. Among them, large commercial banks’ net interest margin was 1.30%, joint-stock commercial banks’ net interest margin was 1.56%, city commercial banks’ net interest margin was 1.37%, and rural commercial banks’ net interest margin was 1.60%.

To ease this pressure, banks must start from the liability side: proactively reduce long-term deposits with higher costs and instead guide customers toward shorter-tenor, lower-cost products.

Lin Yingqi further explained that in the future, this structural change will have additional effects on depositors and banks. For depositors, five-year rates lose their appeal, making them more likely to choose products within three years and reduce allocations with ultra-long horizons. For banks, it is beneficial for lowering funding costs, optimizing the tenor structure, and alleviating margin pressure. He said, “This reflects the implementation of refined liability management. We expect the ‘inversion’ phenomenon in deposit-to-loan interest rates to continue in the short term.”

Jumbo CD rates show strong “resilience to declines”

During this round of deposit rate cuts, some products represented by jumbo CDs have demonstrated strong “resilience.”

Rural commercial banks are undoubtedly major issuers of jumbo CDs. Based on a comparative observation by the reporter from 21st Century Business Herald, the March jumbo CD rates are basically the same as at the beginning of the year. In terms of issuance tenors, there is an even more pronounced trend toward shorter terms: tenors are mostly concentrated in one-year and three-year, while five-year jumbo CDs are rarely seen. From the interest rate level, one-year products are generally between 1.4% and 1.45%, while three-year products cluster around 1.8%, which is about 20 basis points higher on average than similarly tenored products from state-owned big banks.

For example, Huainan Tongshang Rural Commercial Bank’s newly issued one-year and three-year jumbo CD rates are 1.4% and 1.77%, respectively. Jiangsu Guanyun Rural Commercial Bank’s one-year rate is 1.45%. Hunan Chenxi Rural Commercial Bank’s three-year rate is 1.8%. It is worth noting that a few institutions still maintain rates above 2%, such as Changshun County Rural Credit Cooperatives, whose three-year CD rate reaches 2.15%.

In terms of issuance cadence, the supply of jumbo CDs has slowed compared with the start of the year. According to data from China Money Network, there were 282 jumbo CD issuances in January 2026, which fell to 214 in February, and as of March so far there have been 87. Even though issuance volumes have narrowed, small and medium-sized banks represented by rural commercial banks remain absolute leaders in issuance.

Why can jumbo CDs from small and medium-sized banks “withstand” rate-cut pressures relatively well? Lin Yingqi believes there are mainly three reasons. First, jumbo CDs have a high initial deposit threshold (typically starting from 200,000 yuan), and customer stability is strong. They are the bank’s core and high-quality liabilities, so banks are willing to maintain a moderate interest rate advantage to hold onto large amounts of funds. Second, jumbo CDs are often limited-quantity and structurally tiered issuances. Banks can flexibly manage the scale and costs and do not need to cut rates sharply in sync with ordinary deposits. Third, jumbo CDs have liquidity advantages such as transferability, and customer acceptance is relatively high—so there is no need to rely entirely on high-interest competition.

Lin Yingqi concluded: “Overall, this reflects a bank’s differentiated liability strategy: lowering costs with ordinary deposits, stabilizing core funding with jumbo CDs, and balancing cost control with liability stability.”

However, it is worth noting that the interest rate spread between jumbo CDs and ordinary fixed deposits is narrowing. For example, Nanjing Bank: its one-year jumbo CD rate with a minimum deposit of 200,000 yuan is 1.45%, only slightly higher than the 1.35% rate for individual time deposits of the same period with a minimum deposit of 10,000 yuan. Its three-year jumbo CD rate is 1.8%, which is exactly the same as the individual time deposit rate for the same period. This means that for some customers, the premium effect of jumbo CDs has become very small.

(Editor: Wen Jing)

Keywords:

                                                            Deposits
                                                            Interest rates