A staff member sorts cash at a bank in Lianyungang, Jiangsu province. (File photo/Xinhua)
Several local banks in Zhejiang province and Guangxi Zhuang autonomous region, as well as in the cities of Chongqing and Shenzhen, have raised their deposit rates by the maximum limit of 10% above the official benchmark rate, Shanghai's First Financial Daily reports.
The People's Bank of China, the country's central bank, announced on June 7 that the upper limit of the floating band of commercial banks' deposit rates would be adjusted to 1.1 times the central bank's benchmark interest rate. Subsequently, a rural bank in Shenzhen announced that it would raise its deposit rates by 10% over the benchmark rate.
Several banks at village and township levels in the southern city also followed the rural bank's lead. Ginza Village Bank in Shenzhen's Futian area also announced that it would adjust its deposit rates to the maximum level. To date, only one rural bank in Shenzhen has set its deposit rates at the same level as the official benchmark rate.
In addition, several banks across the country also raised their deposit rates by the maximum permitted level.
Limited by the scope of their networks, local banks have encountered difficulties in attracting deposits, prompting bank executives to visit shops to solicit deposits. According to a village bank in Guangdong, its deposit balance was 816 million yuan (US$181.2 million) at the end of 2009, which rose to 940 million yuan (US$147.7 million) in 2010. It absorbed only 60 million yuan (US$9.43 million) between 2010 and 2011.
Under these circumstances, rural banks, which have always been at a disadvantage, are scrambling to attract new deposits and retain old deposits by offering higher interest rates. Previously, lending rates could only be set 10% below the benchmark rate.