Recently, the trend of banks lowering deposit interest rates has continued to expand. Many rural commercial banks and village and town banks in various regions have issued announcements stating that they will lower deposit interest rates. Industry insiders say that the reduction of deposit interest rates by many small and medium-sized banks in various regions is a follow-up to the previous cuts by major state-owned banks and joint-stock banks, which will help banks stabilize their liability costs.
Lowering Deposit Interest Rates
On June 13th, Qionghai Xingfu Rural Commercial Bank issued an announcement stating that starting from June 14th, it would adjust the listed interest rates for current deposits and one-year, two-year, three-year, and five-year fixed deposit and withdrawal periods. The current deposit interest rate of this bank has been adjusted from 0.1% previously to 0.05%, and the one-year, two-year, three-year, and five-year fixed deposit interest rates have been adjusted from 1.68%, 1.75%, 1.95%, and 1.95% respectively to 1.6%, 1.7%, 1.85%, and 1.85%.
On May 28th, the bank adjusted the interest rates for seven-day notice deposits and agreement deposits. After adjustment, the interest rates for seven-day notice deposits and agreement deposits are 1.15% and 0.95% respectively.
Journalists have noticed that since June, many small and medium-sized banks such as rural commercial banks and village and town banks have joined the ranks of lowering deposit interest rates, adjusting the interest rates of various deposit products including demand deposits, time deposits, notice deposits, and agreement deposits.
According to incomplete statistics by reporters, several rural commercial banks including Chaoyang Rural Commercial Bank, Xuwen Rural Commercial Bank, Xinjiang Tianshan Rural Commercial Bank, Leizhou Rural Commercial Bank, and Xixian Rural Commercial Bank, as well as several village and town banks such as Qujing Zhan Yi Xingfu Village and Town Bank, Wenchang Xingfu Village and Town Bank, and Zhuhai Hengqin Village and Town Bank, have lowered their deposit interest rates since early June.
Stabilizing Liability Costs
Industry insiders say that the reduction of deposit interest rates by many small and medium-sized banks in various places is a follow-up to the previous cuts by major state-owned banks and joint-stock banks.
On May 20th, the official websites of six major state-owned banks—Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications, and Postal Savings Bank of China—updated the listed deposit interest rates, lowering the listed interest rates for RMB deposits starting from May 20th. Among them, the interest rates for demand deposits were all reduced by 5 basis points to 0.05%, while the interest rates for fixed-term fixed deposits and withdrawals of three months, six months, one year, and two years were all reduced by 15 basis points, and the interest rates for three-year and five-year deposits were both reduced by 25 basis points.
Among the joint-stock banks, China Merchants Bank cut its deposit interest rate on May 20th. Subsequently, many other joint-stock banks followed suit. As of May 22nd, the deposit interest rates of all joint-stock banks have been completely reduced. City commercial banks, rural commercial banks, private banks, and other types of banks have also followed suit one after another, lowering deposit interest rates.
At present, banks are still under considerable pressure from net interest margins. The data on the main regulatory indicators of the banking and insurance industries in the first quarter of 2025 disclosed by the National Financial Supervision and Administration Commission shows that as of the end of the first quarter of 2025, the net interest margins of state-owned banks, joint-stock banks, city commercial banks, and rural commercial banks were 1.33%, 1.56%, 1.37%, and 1.58% respectively. They decreased by 11 basis points, 5 basis points, 1 basis point, and 15 basis points respectively compared with the end of 2024.
Industry Insights
Industry insiders say that lowering deposit interest rates can reduce banks’ interest expenses, alleviate the trend of long-term deposits, stabilize banks’ liability costs, and is conducive to improving banks’ profitability and enhancing the sustainability of financial services for the real economy.
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