Deposit products paying in the 3 percent range a year are reappearing in the financial sector. As a recent stock market rally drives money into equities, lenders are seen raising deposit rates in a bid to prevent deposit outflows. Rates have moved into the 3 percent range, particularly at internet-only banks and savings banks. Major commercial banks, however, are offering 3 percent rates only in limited cases because of pressure from falling market rates.

As of March 6, major banks began to slightly raise time-deposit rates from last month. Hana Bank lifted the top rate on its "Hana's Time Deposit" to 2.90 percent from 2.85 percent, an increase of 5 basis points. KB Kookmin Bank also raised time-deposit rates by 10 basis points to 2.90 percent from 2.80 percent on Feb. 19, and Woori Bank increased rates by 5 basis points on Feb. 22 to about 2.90 percent.

Among commercial banks, NH NongHyup Bank recently raised the top one-year rate on its flagship time-deposit products, "NH All One e-Deposit" and "NH Waltz Rotating Deposit 2," to 3.05 percent. It is effectively the only time deposit in the 3 percent range among commercial banks.

Time-deposit balances rose slightly but remain below last year's level. As of the end of February, time-deposit balances at the five biggest banks stood at 946.8897 trillion won, up 10.0167 trillion won from the end of the previous month, when they totalled 936.8730 trillion won. The figure is still down 25.1 trillion won from 971.9897 trillion won at the end of November last year.

The financial sector sees the shift as reflecting the impact of some funds moving into the stock market amid the recent boom. Banks are raising deposit rates slightly to defend funding and try to stem these flows. Internet-only banks and savings banks, in particular, have raised rates and stepped up competition to attract funds.

KakaoBank raised its time-deposit rate to 3.0 percent a year from Feb. 13, and K bank also lifted its rate to 3.01 percent on Feb. 21. The moves are seen as a strategy to encourage inflows by offering relatively higher rates.

Average deposit rates at savings banks have also moved above the 3 percent range. As of that day, the average top rate on 307 savings bank deposit products was tallied at 3.07 percent. That was up 0.14 percentage points from 2.93 percent in the same period last month.

Commercial banks are taking a cautious stance on raising rates. With market rates falling, they face a heavy burden in raising deposit rates aggressively. The five-year bank bond yield stood at 3.572 percent as of Feb. 27, down 0.143 percentage points from 3.715 percent at the end of January. The view is that raising deposit rates sharply when funding costs are falling could hurt profitability.

Banks say they will watch money flows through the end of this month. They say they will consider the possibility of additional rate adjustments if the flow of funds into the stock market continues.

Special offers, high-rate instalment savings and parking accounts also launched

In the secondary financial sector and other banks outside commercial banks, lenders are again strengthening strategies to attract deposits by raising rates and offering special promotions, new deposit and savings products and parking accounts.

Sh Suhyup Bank introduced a high-rate instalment savings product for new customers to mark the start of a new school term. Its targeted product, the "Hey Savings," offers a top annual rate of 4.1 percent on a one-year term. The structure adds up to 0.9 percentage points in preferential interest to a base rate of 3.2 percent if customers meet conditions including marketing consent and automatic transfers.

Savings banks are also competing over parking accounts, in addition to deposit products in the 3 percent range. OK Savings Bank introduced a parking account product linked to a payment platform, the "OKxDanal Damoeum Account." The product pays interest on prepaid top-up balances, offering a top annual rate of 7 percent on amounts of 500,000 won or less.

DB Savings Bank launched a mobile-only demand deposit product for new customers, the "DB Happy Parking Account," offering up to 3.5 percent a year. It applies higher rates to balances of 5 million won or less as a strategy to attract small-sum funds.

Acuon Savings Bank also raised the rate on its parking account product, the "High-Yield Free Deposit," by 2.0 percentage points to 2.8 percent from 0.8 percent a year. The rate applies without separate preferential conditions, a move aimed at demand for short-term fund management.

A financial sector official said, "With fund shifts emerging amid the continuing rise in the stock market, the financial sector is slightly adjusting deposit rates or boosting funding competitiveness through new products." The official said, "In particular, the primary banking sector is likely to decide whether to respond while watching market rate trends and fund-movement conditions."