# Major Chinese banks cut deposit rates after reduction in lending rates
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2024-07-25
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Chinese major banks cut deposit rates amid shrinking economy
Meta Description: Five major banks in China reduce deposit rates, following recent lending rate cuts. More banks expected to follow suit to lower funding costs and encourage consumer spending.
URL: https://financedigest.com/major-chinese-banks-cut-deposit-rates-after-reduction-in-lending-rateshtml

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BEIJING/SHANGHAI (Reuters) -Five of China’s major state-owned banks said on Thursday they would cut [deposit](https://www.financedigest.com/spanish-banks-face-rise-in-deposit-costs-central-bank-warns.html) rates, days after the country surprised markets by lowering benchmark lending rates to bolster growth in a struggling economy.

Industrial and Commercial [Bank](https://www.financedigest.com/psd2-the-real-rts-deadline-is-closer-than-banks-think.html) of China (ICBC), Agricultural Bank of China (AgBank), China Construction Bank, Bank of [China](https://www.financedigest.com/china-believes-france-will-provide-fair-business-environment-for-chinese-firms-foreign-ministry-says.html) and Bank of Communications cut [deposit](https://www.financedigest.com/spanish-banks-face-rise-in-deposit-costs-central-bank-warns.html) rates by 5 to 20 basis points (bps), according to statements on their websites.

It marks the first broad reduction in deposit rates by Chinese banks since December last year. There were three cuts in 2023.

More [banks](https://www.financedigest.com/psd2-the-real-rts-deadline-is-closer-than-banks-think.html) will likely follow the big state-owned lenders with cuts after [China](https://www.financedigest.com/china-believes-france-will-provide-fair-business-environment-for-chinese-firms-foreign-ministry-says.html) on Monday lowered major short and long-term interest rates by 10 basis points.

Reducing deposit rates would help lower funding costs for banks at a time when they are under pressure to support economic growth amid a property crisis, weak loan demand and record low interest margins. It could also help encourage consumers to spend more given the low returns on their savings.

ICBC cut its demand deposit rate by 5 basis points to 0.15% and one-year [deposit](https://www.financedigest.com/spanish-banks-face-rise-in-deposit-costs-central-bank-warns.html) rate by 10 bps to 1.35%. Rates on deposits of two years or more were cut by the [bank](https://www.financedigest.com/psd2-the-real-rts-deadline-is-closer-than-banks-think.html) by 20 basis points to 1.45% to 1.8%, according to the bank’s website.

The cuts are likely to weigh on lenders’ profit margins at a time when the net interest margin for commercial banks in China – a key gauge of profitability – narrowed to a record low of 1.54% at the end of March this year, according to official data.

(Reporting by Beijing and Shanghai newsroom; Editing by Himani Sarkar and Jamie Freed)


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