In March, some small and medium-sized banks in China have started to reduce deposit interest rates, with the most significant decrease being 50 basis points, covering fixed deposits ranging from three months to five years.
According to the Securities Daily on March 4th, several small and medium-sized banks including Chongqing Fumin Bank, Guangxi Puben Rural Commercial Bank, Heilongjiang Beian Rural Commercial Bank, Hubei Jiangling Rural Commercial Bank, Yunnan Yuanjiang North Bank Village Savings Bank, and Zhongyang County Taihang Village Savings Bank have issued notices adjusting deposit rates, lowering rates on some deposit products.
Chongqing Fumin Bank has adjusted individual deposit rates starting from March 5, 2025, including two types of fixed deposits for three and five years. After the adjustment, the interest rates for three-year fixed deposits have decreased from 2.70% to 2.60%, and for five-year fixed deposits from 2.60% to 2.50%. This is the bank’s second adjustment of individual deposit rates this year.
Guangxi Puben Rural Commercial Bank has adjusted the Renminbi deposit rates starting from March 1, 2025. The interest rates for three-year fixed deposits have decreased by 10 basis points to 1.55%, and for five-year fixed deposits from 2.05% to 1.60%, a decrease of 45 basis points.
Heilongjiang Beian Rural Commercial Bank has adjusted the three-year fixed deposit rates starting from March 1, 2025, decreasing from 1.95% to 1.85%, a decrease of 10 basis points.
Yunnan Yuanjiang North Bank Village Savings Bank has adjusted rates for some deposit products starting from March 1, 2025. The adjustment includes current deposits, three-month to five-year fixed deposits, among other types. With current deposits decreasing from 0.35% to 0.20%; and fixed deposit rates for three months to five years decreasing to 1.10%, 1.30%, 1.60%, 1.80%, 2.30%, 2.50%, all by 50 basis points. This marks the bank bidding farewell to rates starting with “3”.
Additionally, several rural commercial banks in Hubei province have adjusted the execution rates of some deposit products starting from March 1, 2025. For instance, Hubei Nanzhang Rural Commercial Bank’s FuMan product three-year fixed deposit rate has dropped from 2.2% to 1.9%, a decrease of 30 basis points.
Overall, these banks’ deposit rate adjustments affect current deposits and fixed deposits ranging from three months to five years, with a focus on long-term deposit products and a maximum reduction of 50 basis points. Some rural commercial banks have seen their three and five-year fixed deposit rates drop to below “2%”, losing the advantage compared to the current rates of state-owned banks with the same terms.
The Securities Daily reported that in February, several small and medium-sized banks had already begun to lower deposit rates, with some village banks adjusting rates three times since the beginning of the year. However, there are also banks that have “defied the trend” by increasing some deposit rates.
Regarding the recent trend of small and medium-sized banks reducing deposit rates, Chief Economist of Citic Securities Ming Ming stated to the Securities Daily, “This phenomenon reflects that the net interest margin pressure on small and medium-sized banks is more significant. Especially because these banks have a relatively weak customer base and rely more on high-cost deposits, the narrowing net interest margin pressure is more prominent. Additionally, with newly issued loan rates continuing to decline, and existing mortgage rates being cut, this further compresses the bank’s asset income. Therefore, lowering deposit rates is an active choice for small and medium-sized banks to alleviate net interest margin pressure and optimize liability costs.”
Researcher at China Postal Savings Bank, Lou Feipeng, believes that given the current low net interest margin in the banking industry, small and medium-sized banks are facing greater pressure for net interest margin reduction, and therefore need to lower liability costs to stabilize net interest margins.
According to the recently published data by regulatory authorities, in the fourth quarter of 2024, commercial banks’ net interest margin continued to decline, down by 0.01 percentage points to 1.52%. City commercial banks and private banks experienced significantly higher declines in net interest margin compared to the industry average. In the fourth quarter, city commercial banks not only saw larger declines, but also had the lowest net interest margin level, at only 1.38%.
Expert opinions obtained by the Securities Daily suggest that overall, there is still room and possibility for various banks to lower deposit rates in the future. Ming Ming stated, “Considering the pressures of bank deposit outflows, it is expected that the rate and pace of deposit rate cuts may be weaker than in 2024. Looking at different types of banks, small and medium-sized banks currently have higher liability costs and more pronounced net interest margin pressures, which may give them greater motivation and space to lower deposit rates.”
Regarding the impact of banks lowering deposit rates, the Chinese self-media personality “Cai Fa Guan Tian Xia” believes that although reducing deposit rates can temporarily increase banks’ financing support to the real economy, in the long run, there is also the risk of deposit outflows.
Overall, the reduction of deposit rates by banks reflects changes in the market environment, but for ordinary depositors, it means a decrease in deposit returns, further weakening their purchasing power.
In response, netizen “Xi Yuan” said, “Don’t even talk about lowering rates, even if there is no interest, as long as it’s safe and convenient, ordinary people like us also need to save some extra money! (In the future, if there is a chance to invest, you can buy a small safe to store cash, so at this stage, avoid unnecessary investments and spending! ~A feeling from an elderly man in his sixties!”
Netizen “Li Wanku” commented, “Can reducing interest rates stimulate consumption? I don’t think so!”