Bank Savings Interest Dropped To 4 Percent Level

As the banks, the National Agricultural Cooperative Federation (NACF) and the post office, have lowered the deposit interest rate one after another, the average deposit rate dropped to the 4 percent level for the first time. And the average interest rate for the loans on the large group also recorded for the first time the 7 percent level, which is 7.83 percent yearly during June.

The financial institutions` interest cut is likely to result in the increase of the income tax, for interest collecting as a tax 16.5 percent of the interest, and the increase of the real interest rate considering the consumer price increase rate of about 4.4 percent.

The Kookmin Bank and the Housing and Commercial Bank (H&CB) said yesterday that they would lower their deposit rate on one-year regular savings from yearly 5.4 percent to 4.9 percent, by as much as half a percentage point. It is for the first time that the banks` deposit rate fell to the 4 percent level. The Kookmin Bank and the H&CB cut the deposit rate on three-year regular savings from 5.9 percent to 5.5 percent, and they decided to lower other interest rates according to a kind and a period of the savings.

And the Hana Bank also decided to lower the deposit rate on one-year regular savings from yearly 5.8 percent to 5.6 percent, a 0.2 percentage point. The NACF plans to reduce the deposit rate on under one-year savings by 0.2 percentage point and the deposit rate on one-year savings by 0.1 percentage point from August 1st.

The Korea Post will drop its deposit rate by 0.2-0.6 percentage points from August 1st. By the kind of savings, the one-year regular savings (including the regular savings for a living) will be dropped by 0.3 percentage point, and the installment savings and the preferential installment savings for household will be reduced by 0.5 percentage point. And the Korea Post will also cut the interest rate on the Repurchase Agreement (RP) by 0.6 percentage point.

Meanwhile, the Bank of Korea declared that the average deposit rate of the banks dropped to yearly 5.06 percent during June, down by 0.05 percentage point from May. And since the banks lowered the deposit rate on regular savings by 0.3 percentage point after the call rate was cut by 0.25 percentage point, the deposit rate fell to 4.95 percent on July 15th, which marked the drop of the deposit rate into the 4 percent range.

hcs@donga.com