Commercial banks announce hikes in interest rates on fixed deposits

BANGKOK, 16 July 2010 (NNT) —Interest rates on fixed deposits and lending rates have been hiked by financial institutions following the hike in the policy rate by the Central Bank.

Krungthai Bank has announced its fixed deposit interest rate hike of 0.25-0.35%, while key lending rates would be increased by 0.125-0.15%, effective today. Siam Commercial Bank (SCB) also raised its fixed deposit rate by 0.1-0.55%, effective today as well.

According to SCB Senior Managing Director Kannikar Chalitaporn, the rise in rates of deposits is due to increased demands for loans, making it necessary for the bank to raise more deposits, which, in turn, leads to an increase in funding costs

Managing Director of Krungthai Bank Apisak Tantiworawong, the hike in deposits are higher than lending rates is aimed at narrowing the gap between the two.

However, Chairman of Export-Import Bank of Thailand (EXIM) Narit Chaiyasoot has confirmed that the banks will not increase its lending rates until the end of August, while former Commerce Minister Narongchai Akaraserani believes that the hike in policy rate will not affect the GDP and the interest rates overall is expected to increase by 0.5%.

According to Prasarn Trairatvorakul,who will soon become the Bank of Thailand (BoT) Governor, the interest rates on fixed deposit will increase first as they react faster to changes in market rates. In addition, during the fall of interest rates, money has been transferred to savings accounts due to its more liquidity. That is the reason why fixed rates will have to be increased first to attract depositors; savings interest rates will be adjusted later proportionately.