South Korean lenders are competitively offering high-interest installment savings products as they fear a mass outflow of deposit customers amid falling interest rates.

The offering comes after major commercial banks saw their time deposit rates drop below the 3 percent threshold following a series of benchmark interest rate cuts.

According to the Korea Federation of Savings Banks on Monday, the average interest rate for one-year fixed deposits across 79 domestic savings banks stood at 3.02 percent.

The annual rate was close to 4 percent in January 2024, but since October, it has been falling sharply and is now on the verge of entering the 2 percent range.

The last time the average interest rate for one-year deposits at savings banks fell below 3 percent was in mid-June 2022.

The sharp drop in deposit rates at savings banks comes following the Bank of Korea’s interest rate cuts.

The central bank has lowered its benchmark interest rate three times from 3.5 percent to 2.75 percent since it pivoted its monetary policy in October 2024 after more than three years.

When the benchmark rate falls, the lending rates applied by banks also decline, making it difficult for financial institutions to offer high-interest deposit products.

According to the Korea Federation of Banks, the base rate for regular fixed deposit products at the five major commercial banks ranged between 2.90 percent and 2.95 percent per year as of Monday.

KB Kookmin Bank’s flagship deposit product, KB Star, saw its annual interest rate drop from 3.35 percent in October 2024 to 2.95 percent as of Monday.

Similarly, interest rates at Shinhan, Hana, Woori, and NH Nonghyup banks decreased by approximately 0.4 percentage point over the same period.

Banks are now competing to launch high-yield savings products to prevent a mass outflow of deposit customers due to falling interest rates, offering interest rates exceeding 10 percent.

The lenders are concerned that younger customers, already gravitating toward U.S. stocks and cryptocurrencies, may completely lose interest in deposit and savings products.

KB Kookmin Bank introduced the third edition of its KB Star Savings product in March.

It offers a base annual interest rate of 3 percent, with an additional 3 percentage points for meeting specific conditions, bringing the maximum rate to 6 percent.

Customers can deposit between 10,000 won ($6.9) and 300,000 won per month for 12 months, with a maximum interest payout of 117,000 won before tax and 98,990 won after tax for those eligible.

Another lender, iM Bank, has launched the Check-in Savings product, targeting golf enthusiasts.

Available until April 13, 2025, this product is limited to 10,000 accounts.

Customers receive preferential interest rates by verifying their location at golf courses, with the base rate at 2.77 percent per annum and the maximum rate of 7.77 percent per annum when all bonuses are applied.

Hana Bank has also introduced a series of savings products with interest rates ranging from 5.5 percent to 8 percent.

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