High-interest savings accounts help banks deal with liquidity crunch

Banks have attempted to boost liquidity and woo depositors at the same time by offering special savings products carrying high interest rates, along with other attractive conditions.
These products combine the outstanding character of savings accounts – customers can withdraw money with reasonable frequency – with the outstanding feature of fixed deposits, which is high interest rates.

TMB Bank’s “No Fixed” product offers high interest but allows withdrawals twice per month. Its interest rate is 3 per cent per annum, higher than TMB’s own 24-month fixed deposit, which offers 2.75 per cent.

Launched last year, No Fixed now has more than 600,000 accounts, compared with about 300,000 accounts in TMB’s fixed-deposit programme.

Bank of Ayudhya also launched a special savings account, “Krungsri Saving Mee Tae Dai”, last week, offering a maximum of 2.9 per cent interest per annum and allowing withdrawals via any of the bank’s channels, from branch counters to online. Customers can make two withdrawals per month.

A minimum deposit of Bt500 is required to open a new account with no requirement of minimum outstanding balance. One person can hold an unlimited number of accounts. However, customers will enjoy the maximum 2.9-per-cent rate only when they deposit between Bt100,000 and Bt10 million.

The maximum rate of Krungsri Saving Mee Tae Dai is higher than that of the bank’s 12-month fixed account, which offers 2.75 per cent for deposits of no more than Bt5 million.

Tisco Bank has two special savings products. “Diamond Savings” pays interest of 3 per cent per annum, with unlimited withdrawals. The minimum deposit is Bt1 million and the maximum Bt10 million. The second package is the “Super Saving Account”, which pays 2.75 per cent. Its customers can withdraw money twice a month, and the minimum deposit requirement is Bt100,000.

Thanachart Bank has “Ultra Savings” with 2.5-per-cent interest and allowing cash withdrawals twice per month. This rate is paid to account holders who deposit between Bt1 million to Bt10 million; deposits below that range but no less than Bt30,000 get 2.25 per cent.

The pursuit of funds is to support loan growth. According to a banking industry report to the Bank of Thailand, the overall loan-to-deposit (L/D) ratio as of the end of April was 91.67 per cent.

Bangkok Bank has the advantage in terms of L/D ratio with 89 per cent, while other major banks have L/D ratios exceeding 90 per cent: Krung Thai Bank’s is 90.1 per cent, Siam Commercial Bank’s 94 per cent and Kasikornbank’s 91.4 per cent.

Tisco Bank has the highest L/D ratio of 106 per cent, followed by Kiatnakin Bank with 100.9 per cent and Thanachart Capital with 100.3 per cent.

The tight liquidity of small banks could be a barrier to future lending growth. The liquidity crunch is a result of government policies to enhance private in-|vestment and domestic con-|sumption. This accelerates loan growth, and the commercial |banks must aggressively chase funds through deposits and other instruments such as debentures and subordinated debt to back the loans.

This competition for funds will put pressure on banks’ financing costs in addition to the requirement to pay a premium of 0.47 per cent to the Deposit Protection Agency and the Financial Institution Development Fund.