Medium and small banks' long-term deposit interest rates drop to the "1-digit" range, and the downward trend may continue in the future.

Reporter Peng Yan

Since March, several city commercial banks, rural commercial banks, and village and town banks have successively cut their time deposit rates. The time deposit rates for medium-sized and smaller banks for 2-year, 3-year, and 5-year terms have generally fallen to below 2%, officially ushering in the “single-digit” era.

Luo Feipeng, a researcher at China Postal Savings Bank, said in an interview with Securities Daily that this is mainly driven by pressure from a narrowing net interest margin and continued downward movement of loan-end interest rates. It also reflects that the banking industry has entered a stage of refined liability management—i.e., using interest rate inversion to guide funds to shift toward the medium- and short-term. At the same time, it signals that the progress of deposit interest rate marketization is accelerating, with medium-sized and smaller banks shifting from extensive deposit gathering to differentiated competition.

In detail, this round of deposit interest rate adjustments has a broad coverage. Small and medium-sized banks in multiple regions, including Hubei, Yunnan, Xinjiang, Jiangsu, and Shanghai, have issued deposit interest rate adjustment announcements one after another.

For example, on March 11, Hubei Yichang Three Gorges Rural Commercial Bank released an announcement on adjustments to Renminbi deposit interest rates. In it, the annual interest rates for 3-year and 5-year time deposits for fixed-term deposit products (principal and interest at maturity) were both adjusted to 1.50%, down 5 basis points from the previous rates. For the “Fuman Ying” series of products, the 1-year, 2-year, and 3-year annual interest rates were lowered to 1.15%, 1.25%, and 1.55%, respectively, down by 25 basis points, 25 basis points, and 30 basis points from the previous rates.

Nanjing Pukou Jingfa Village and Town Bank also issued an announcement recently, stating that effective March 9, 2026, the personal 1-year deposit interest rate will be adjusted from 1.85% to 1.65%. The 2-year deposit interest rates for both corporate and individual customers will be adjusted from 1.8% to 1.65%. In addition, effective March 2, 2026, the bank has lowered the 3-year and 5-year time deposit interest rates for both corporate and individual customers to 1.88%, down 32 basis points from the previous level of 2.2%.

In addition, Shandong Chiping Hulu Rural Commercial Bank, Yunnan Yuangjiang Beiyin Village and Town Bank, Xinjiang Bank, Shanghai Songjiang Fuming Rural Commercial Bank, and Heilongjiang Youyi Rural Commercial Bank, among others, all lowered their deposit benchmark/priced interest rates in March. The adjustment targets are mainly long-term fixed-term deposits, with the cut range generally between 5 and 30 basis points.

The key regulatory indicators for the banking industry in 2025 Q4, released by the National Financial Regulatory Administration, show that as of the end of 2025 Q4, commercial banks’ net interest margin was 1.42%, unchanged from the end of the third quarter and second quarter. By type of institution, city commercial banks and rural commercial banks had net interest margins of 1.37% and 1.60%, respectively. Against the backdrop of net interest margins continuing to operate at low levels, together with the Loan Prime Rate (LPR) staying at low levels, it further intensifies banks’ cost-control pressure on the liability side.

Xue Hongyan, a special research fellow at Su Shang Bank, told Securities Daily that in the context where repeated cuts to the LPR have led to lower asset-side yields, medium-sized and smaller banks—whose sensitivities are greater to liability costs—find it difficult to continue expanding their scale by gathering deposits with high interest rates. This round of rate cuts is both a follow-up and additional reduction in response to prior interest rate adjustments by nationwide commercial banks, and a response to regulatory guidance—shifting the focus from scale expansion to a high-quality development transition of controlling costs and improving efficiency.

Luo Feipeng said that in the future, the deposit interest rates of medium-sized and smaller banks will likely continue the downward trend. The interest rates on long-term products may be further lowered. The share of short-term products is expected to increase, and the phenomenon of interest rate inversion by term may become even more widespread, reflecting industry expectations consistent with a long-term decline in interest rates. Medium-sized and smaller banks will also place greater emphasis on optimizing their deposit structure, launching differentiated products through digital channels, and improving the refinement level of liability management.

Xue Hongyan further said that looking ahead, the direction of bank deposit interest rates will depend more on macroeconomic operations, the demand for financing by the real economy, and the flexible use of monetary policy tools. If relevant factors change significantly, there is also the possibility that the interest-rate trend could adjust. Against this backdrop, rate differentiation among different banks and among different-term products is likely to persist: institutions with stable operations and relatively lower liability pressures may compress deposit costs to a greater extent, while some banks facing heavier deposit-gathering pressure will set differentiated pricing according to their own needs. At the same time, the term structure of deposit interest rates may continue to adjust as well. If the appeal of ultra-long-term products declines, it will further guide funds toward the medium- and short-term, helping banks optimize their liability structure and stabilize their net interest margins. Overall, bank deposit interest rates are set to enter a more flexible, more game-like market-oriented operating stage.

(Editor: Wen Jing)

Keywords:

                                                            Interest rates
                                                            Deposits