Korean Banks Raise Time Deposit Rates to Mid-3% Amid Base Rate Hikes
Following two base rate hikes by the Bank of Korea, major South Korean commercial banks are accelerating interest rate increases on their core fixed-deposit products, pushing returns into the mid-3 percent range according to reporting by YTN.
Major Banks Raise Fixed-Deposit Rates
South Korean banks are aggressively raising the yields on their flagship deposit accounts to capture customer funds. According to YTN reporting, Shinhan Bank increased its fixed-deposit rate from 3.2 percent to 3.4 percent on September 9. NH 농협 Bank and Woori Bank followed suit on September 10, by raising their respective rates by 0.2 percentage points.
Hana Bank also joined the deposit competition. The institution previously raised its rate by 0.3 percentage points to 2.9 percent in July, and added another 0.1 percentage point increase in September. These adjustments across major financial institutions align directly with the central bank’s monetary policy decisions.
Five Major Bank Deposit Balances Cross Major Thresholds
The rising deposit rates have coincided with a significant milestone for household savings. YTN reports that cumulative fixed-deposit balances across the five major commercial banks surpassed 10 trillion won for the first time this month.
Higher yields are altering retail investment patterns by slowing down leveraged borrowing, commonly known in South Korea as “bit-tu” (investing with borrowed money). According to KB Securities Senior Researcher Ryu Jin-i, cited by YTN, households began increasing their fixed-deposit assets starting in August. Ryu noted that the speed of individuals moving funds into the stock market through leverage or withdrawals from savings accounts is slowing down.
Stock Market Liquidity Shifts Toward Bank Deposits
The shift toward safer banking products comes as domestic equities struggle in a prolonged trading range. YTN notes that the local stock market has remained trapped below key market milestones for a month. Daily average trading volume on the main bourse has dropped by more than half compared to June figures.
Furthermore, investor deposit levels—frequently viewed as market “ammunition”—have dropped to their lowest point since mid-January. Economic commentator Kwon Hyuk-jung told YTN that retail investors are targeting yields of at least 3 percent. With equities remaining confined to a narrow trading band, market participants increasingly favor bank deposits over risk assets.
Although the stock index recently managed to re-enter higher valuation ranges, that recovery was heavily supported by share buybacks from Samsung Electronics and SK Hynix. Analysts and market observers continue to monitor whether remaining macroeconomic uncertainties and future interest rate shifts will provide sufficient momentum for further gains through the remainder of the second half.