As major banks continue to lower deposits interest rates, products with rates in the 2% range, and even the 1% range, are emerging. Considering last month's inflation rate of 2.1%, the actual deposits interest rate is effectively at a 'zero' or negative level.
According to the financial sector on the 8th, SC First Bank has reduced the annual interest rates of major deposits products starting in April, with the basic interest rate for its representative deposits product, 'First Regular Deposit', now only at 1.95% for a one-month maturity. The three-month maturity product is at an annual rate of 2%, and the six-month maturity product is at an annual rate of 2.1%. The interest rate for the parking account 'First EZ Account' has also decreased to around 1.4%.
The interest rates for one-year maturity deposits products have also plummeted. The basic interest rate for 'The Solid Deposit' from BNK Bank of Gyeongnam stands at an annual rate of 2.0%. Similarly, 'Smile Dream Regular Deposit' from Jeju Bank has a basic interest rate of just 2.05%. This means that considering last month's consumer inflation rate of 2.1%, the real interest rate (nominal interest rate - inflation rate) is negative, and even with various preference interest rates included, it remains in the 0% range.
The interest rate for parking accounts, which are savings-type deposits that allow for deposits and withdrawals at any time, is also in the 1% range. Although parking accounts have relatively high rates despite low deposit limits and have consistently enjoyed popularity, they have not been able to withstand the rate cuts. Last month, Woori Bank reduced the interest rate for its parking account 'Money Clip' from 1.5% to 1.25%, and IBK Industrial Bank's 'Money Box', which had an interest rate of over 3% at the time of its release last year, now offers a maximum rate of 1.5%. Even the parking accounts of internet banks such as KakaoBank, Kbank, and Toss Bank, which are known for having relatively higher rates than traditional banks, are only at about 1.8% to 2%.
Already, commercial banks have been successively lowering the interest rates of their major receiving products. Hana Bank started lowering the rates on major receiving products from 0.30 percentage points beginning on the 24th of last month, while Woori Bank followed suit on the 26th of the same month. Shinhan Bank is also applying a maximum reduced rate of 0.25% to its major receiving products since the 28th of last month. According to the Bankers Association, the lower end of the basic interest rate for 12-month maturity products from the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) is at about 2.15%, just above the inflation rate. The maximum interest rate is also at 2.9%, which is less than 3%.
The reason the bank receiving interest rates have fallen to the 1% range is due to the Bank of Korea's reduction of its benchmark interest rate. Following the reduction of the benchmark interest rate, banks are proactively lowering their receiving interest rates, including deposits interest rates, reflecting the market interest rates. Under these circumstances, concerns about high exchange rates and household debt have led the Bank of Korea to suggest an additional benchmark interest rate cut of 0.25% to 0.5% within the year, indicating that the deposits interest rate situation does not seem to be improving. When the benchmark interest rate is lowered, the market interest rates decrease as well, resulting in lower deposits interest rates.
Given the situation, there is a phenomenon where funds are moving from low-interest receiving products to investments in stocks and gold. As of the end of last month, the demand deposits from the five major banks, including market-placed funds classified as investment-waiting funds, stood at 650 trillion 124.1 billion won, an increase of 18 trillion 890.6 billion won compared to the end of last year.
A bank official explained, 'The interest rate for demand deposits is at about 0.1%, which means virtually no interest can be earned. With the real interest rate for deposits being zero, there is growing demand to wait in demand deposits where one can withdraw funds immediately when a desired investment opportunity arises, instead of trapping money in deposits.'