In December of last year, the balance of time deposits at major commercial banks decreased by more than 20 trillion won. It appears that consumer flight increased as banks sequentially lowered interest rates on deposits.
According to the five major banks (KB Kookmin, Shinhan, Hana, Woori, and NongHyup Bank), the balance of time deposits as of December last year stood at 927.09 trillion won, a decrease of 21.1285 trillion won from the previous month. The balance of regular savings increased by 3.872 trillion won to 39.9277 trillion won compared to the previous month, but it also declined by 5.9355 trillion won from the end of 2023.
The balance of time deposits had increased for seven consecutive months until the end of November last year. After recording 872.882 trillion won in April, it reached 948.2201 trillion won in November. The possibility of a rate cut by the Bank of Korea led to an increase in 'last train' demand for high-interest deposits.
However, as the year-end approached, demand disappeared as banks' deposit rates showed a downward trend due to the influence of the benchmark rate. According to the Korea Federation of Banks, the average basic interest rate for 12-month time deposits at the five major banks is recorded at 2.64%. Considering that the highest interest rate, including preferential rates, averaged 3.20%, it has significantly decreased from the upper 3% range offered earlier last year.
In fact, Woori Bank's 'WON Plus Deposit' had the highest rate at 3.20% among the five major banks, while Hana Bank's 'Hana Time Deposit' and NongHyup Bank's 'NH Hometown Love Donation Deposit' followed at 2.60%. Shinhan Bank's 'Sole Easy Time Deposit' and Kookmin Bank's 'KB Star Time Deposit' were limited to 2.40%.
It seems unlikely that deposit interest rates will rise for the time being. This is because the benchmark rate has entered an official cutting cycle starting this year. The Bank of Korea lowered the benchmark rate by 0.25 percentage points consecutively in October and November last year.
Further cuts are also expected this year. The Bank of Korea noted in its '2025 Currency Credit Policy Operation Direction' that "the benchmark rate will be lowered further in line with changes in economic conditions while ensuring inflation remains stable and downward pressure on growth is alleviated, while also being mindful of financial stability risks."
In fact, waiting funds for investment have increased. Demand deposits at the five major commercial banks grew by 23.5 trillion won from the previous month, reaching 631.2335 trillion won. Demand deposits refer to non-interest-bearing funds, such as checking accounts allowing for regular deposits and withdrawals, which can be accessed anytime if the depositor wishes.