Major Banks Offer Up to 4% Interest on Deposits as Competition Intensifies

As interest rates rise due to increases in the base rate, major banks are enhancing their deposit rates, diminishing the competitive edge of internet banks and savings banks. With several time deposit products now offering interest rates of up to 4%, consumers seeking high-yield deposits have more options available.

According to the Korea Federation of Banks on October 15, the highest interest rate for one-year time deposits at the five largest banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) averages 3.57%. Shinhan Bank is offering a limited-time product that provides a base rate of 3.6% plus an additional 0.4 percentage points for customers meeting certain conditions, bringing the total to 4.0%. This marks the first time since June 2024 that one-year time deposit rates at banks have reached the 4% level.

Other major banks are also introducing high-interest products around the 4% mark. BNK Kyongnam Bank's 'The Dundeun Deposit' offers a maximum rate of 4.10%, while SC First Bank's 'e-Green Save Deposit' provides 4.05%. Jeju Bank's 'J Time Deposit' and Shinhyup Bank's 'Sh First Meeting Preferred Deposit' offer rates of 3.99% and 3.91%, respectively.

The increase in deposit rates at major banks is attributed to rising market interest rates following the Bank of Korea's consecutive base rate hikes in July and August. This has raised banks' funding costs, prompting them to raise deposit rates to secure more funds.

The interest rate gap between internet banks and savings banks is narrowing as well. As of this month, the average interest rate for one-year time deposits at three internet banks is 3.66%. K-Bank's 'My Way Interest Earning Time Deposit' has the highest rate at 3.71%, followed by Kakao Bank at 3.70% and Toss Bank's 'Early Interest Earning Time Deposit' at 3.60%. Some high-interest products from major banks now exceed the rates offered by internet banks.

The interest rate gap with savings banks is also closing. According to the Korea Savings Bank Association, the average interest rate for 12-month time deposits at 79 savings banks is 3.78%. While OK Savings Bank and JoEun Savings Bank offer rates of up to 4.10%, only 25 out of 315 products exceed the 4% threshold.

However, savings banks are taking a cautious approach to further rate increases. A financial industry source stated, "Savings banks had already raised deposit rates before the base rate increase to secure funds. Their capacity to utilize the secured funds for loans is limited, so the incentive to raise deposit rates further is relatively low."