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29 Nov 2022

Econ Digest

Banks hike deposit rates, reflecting increased competition in the deposit market


        The Monetary Policy Committee (MPC) began raising its policy rates at its August and September 2022 meetings by 0.25% each time, for a total of 0.50%, bringing the current policy rate to 1.00%. However, instead of raising interest rates immediately, most large commercial banks waited until October 2022, particularly for deposit rates, which have seen substantial increase in the special deposit campaigns launched primarily by large and small commercial banks; possibly, this is in part to replenish deposits that had matured or are about to mature. Pricing competition has gradually increased in the deposit market, probably driven by many factors, including consistency with the direction of the MPC’s policy rate, a steady growth in loans, a gradual decline in excess liquidity and attempts by commercial banks to maintain their deposit customers.
        Looking ahead, although KResearch views that deposits will not grow at an accelerated rate, deposit rates are likely to rise in a steeper manner, driven by a combination of hikes in both the MPC’s policy rates and commercial banks’ interest rates (ahead of the scheduled increase of another 0.23% in contributions to the Financial Institutions Development Fund at the beginning of 2023). As a result, deposit rates may increase by more than 0.50% by 1Q2023. Meanwhile, it is expected that deposits within the Thai commercial banking system will grow at roughly 3.5-3.7% at the end of 2022, decelerating from the 4.0% growth reported at the end of 2021. However, deposits are expected to grow slightly to 4.0-5.5% during 2023, in line with the steady economic recovery and commercial banks’ plans to maintain sufficient liquidity to accommodate loan growth.  

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