Long-term deposit interest rates at many small and medium-sized banks have dropped to the "1" level

Reporter: Peng Yan

Since March, multiple city commercial banks, rural commercial banks, and village banks have successively lowered their fixed deposit interest rates. The 2-year, 3-year, and 5-year fixed deposit interest rates at small and medium-sized banks have generally dropped below 2%, officially entering the “1.x” era.

Liu Feipeng, a researcher at the China Postal Savings Bank, analyzed in an interview with the Securities Daily that this is mainly due to the pressure of narrowing net interest margins and the continued decline in loan rates. It also reflects that the banking industry has entered a stage of refined liability management, guiding funds to shift towards the medium and short term through interest rate inversion. At the same time, this marks an accelerated process of marketization of deposit interest rates, with small and medium-sized banks shifting from extensive deposit gathering to differentiated competition.

Specifically, this round of deposit rate adjustments has a wide coverage. Small and medium-sized banks in many regions, including Hubei, Yunnan, Xinjiang, Jiangsu, and Shanghai, have successively issued announcements regarding adjustments to deposit rates.

For example, on March 11, Hubei Three Gorges Rural Commercial Bank issued an announcement regarding RMB deposit rate adjustments. Among them, the annual interest rates for 3-year and 5-year fixed deposits were both adjusted to 1.50%, a decrease of 5 basis points compared to the previous rates; the annual interest rates for the “Fuman Ying” series products for 1-year, 2-year, and 3-year terms were lowered to 1.15%, 1.25%, and 1.55%, respectively, a reduction of 25 basis points, 25 basis points, and 30 basis points compared to previous rates.

Nanjing Pukou Jingfa Village Bank also recently announced that starting from March 9, 2026, the personal 1-year deposit rate will be adjusted from 1.85% to 1.65%, and the unit and personal 2-year deposit rates will be adjusted from 1.8% to 1.65%. Additionally, starting from March 2, 2026, the bank has lowered the unit and personal 3-year and 5-year fixed deposit rates to 1.88%, a decline of 32 basis points from the previous level of 2.2%.

Moreover, Shandong Chiping Hnongshang Village Bank, Yunnan Yuanjiang Beiyin Village Bank, Xinjiang Bank, Shanghai Songjiang Fuming Village Bank, Heilongjiang Youyi Rural Commercial Bank, and others have all lowered their deposit posted rates in March, primarily targeting long-term fixed deposits, with reductions in the range of 5 basis points to 30 basis points.

Data from the National Financial Regulatory Administration on the key regulatory indicators of the banking industry for the fourth quarter of 2025 shows that by the end of the fourth quarter of 2025, the net interest margin of commercial banks was 1.42%, unchanged from the end of the third and second quarters. By type of institution, the net interest margins for city commercial banks and rural commercial banks were 1.37% and 1.60%, respectively. Under the background of continuously low net interest margins, combined with the low level of the Loan Prime Rate (LPR), it has further intensified the pressure on banks to control the costs on the liability side.

Xue Hongyan, a special researcher at Su Commercial Bank, told the Securities Daily that against the backdrop of multiple reductions in the LPR leading to lower asset-side yields, small and medium-sized banks, which are more sensitive to liability costs, find it difficult to continue relying on high interest rates for deposit gathering to achieve scale expansion. This round of adjustments is both a follow-up to the previous interest rate adjustments by national commercial banks and a response to regulatory guidance, transforming from scale expansion to cost control and efficiency improvement for high-quality development.

Liu Feipeng stated that the deposit interest rates at small and medium-sized banks are expected to continue their downward trend in the future. Long-term product rates may continue to decline, while the proportion of short-term products is expected to increase. The phenomenon of interest rate inversion is likely to become more common, reflecting a consensus in the industry regarding expectations of long-term low rates. Small and medium-sized banks will also pay more attention to optimizing deposit structures, launching differentiated products relying on digital channels, and enhancing the sophistication of liability management.

Xue Hongyan further stated that looking ahead, the trend of bank deposit interest rates will depend more on macroeconomic operations, real financing demand, and the flexible use of monetary policy tools. If relevant factors change significantly, there is a possibility of adjustments in interest rate trends. In this context, interest rate differentiation among different banks and different term products may continue to exist: institutions with stable operations and less liability pressure may further compress deposit costs, while some banks with greater deposit gathering pressure will implement differentiated pricing based on their needs. At the same time, the term structure of deposit interest rates may continue to adjust. If the attractiveness of ultra-long-term products declines, it will further guide funds to shift towards the medium and short term, helping banks optimize their liability structures and stabilize net interest margins. Overall, bank deposit interest rates will enter a more flexible and competitive market-driven operating phase.