“I’ve cut deposit rates twice in a month.”Mr. A, in his 30s, who signed up

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“I’ve cut deposit rates twice in a month.”

Mr. A, in his 30s, who signed up for a deposit product through a savings bank last month, received two text messages to cut deposit rates in the last month. Interest rates, which were well over 3% at the time of joining, are now down to around 2%. The interest rate on parking accounts of savings banks has also fallen from 3% to 2.8%.

A said, “I put in a lot of money because I heard that the deposit protection limit has been raised, but I think I need to look for other investment destinations.”

Savings bank deposit rates are on the decline due to low interest rates. Despite the favorable factors of raising the depositor protection limit, expectations for Money Move are fading as market disappointments build up due to low interest rates.

According to the Korea Federation of Savings Banks, the average interest rate for term deposits (based on one-year maturity) at 79 domestic savings banks was 2.88 percent as of the 26th of this month. The average interest rate was around 3% in early August, but it fell 0.12 percentage points in about two months.

As savings bank deposit rates come down, the gap between the five major banks in Korea (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) is only 0.3 to 0.5 percentage points. According to the Korea Federation of Banks, the average interest rate on one-year fixed-term deposits at the five major banks is 2.32-2.51 percent.

Usually, savings banks attract funds by providing interest rates that are about 1 percentage point higher than those in the banking sector. As the difference between the banking sector and deposit interest rates has narrowed to 0.5 percentage points, there is also a loss of funds to find more attractive investment destinations. The balance of savings banks received throughout the year was less than 100 trillion won, which once fell.

Initially, the market expected that as the depositor protection limit was raised from 50 million won to 100 million won, market funds would flock to savings banks that provide relatively high interest rates. It is also expected that sales of special products will be expanded with high interest rates as a weapon to attract new customers.

The savings banking industry seems to have had little incentive to attract new funds at high interest rates at a time when it has to manage its soundness, such as an increase in delinquency rates. Savings banks make money from loan-to-deposit margins that use deposits received from customers for loans.

However, as the demand for loans from companies and individuals has decreased due to concerns over a recent economic slowdown, expectations for profit from the loan-to-deposit…