Small and Medium-Sized Banks' Medium and Long-Term Deposit Rates Drop to "Single Digits" Future May Continue Downward Trend

Reporter Peng Yan

Since March, many city commercial banks, rural commercial banks, and village banks have consecutively lowered their fixed deposit interest rates. The 2-year, 3-year, and 5-year fixed deposit rates for small and medium-sized banks have generally fallen below 2%, officially entering the “single-digit” era.

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

Specifically, this round of deposit rate adjustments covers a wide range, with many small and medium-sized banks in Hubei, Yunnan, Xinjiang, Jiangsu, Shanghai, and other regions announcing deposit rate changes.

For example, on March 11, Hubei Three Gorges Rural Commercial Bank announced adjustments to its RMB deposit rates. The fixed deposit rates for 3-year and 5-year terms were both adjusted to 1.50%, a decrease of 5 basis points from previous rates. The “Fuman Ying” series products’ 1-year, 2-year, and 3-year annual interest rates were lowered to 1.15%, 1.25%, and 1.55%, respectively, a decrease of 25, 25, and 30 basis points from previous rates.

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

Furthermore, banks such as Shandong Chiping Hunan Rural Commercial Bank, Yunnan Yuanjiang North Silver Village Bank, Xinjiang Bank, Shanghai Songjiang Fuming Village Bank, and Heilongjiang Youyi Rural Commercial Bank have all lowered their listed deposit rates in March, mainly for long-term fixed deposits, with reductions ranging from 5 to 30 basis points.

According to the regulatory indicators for the banking industry in Q4 2025 released by the National Financial Regulatory Administration, as of the end of Q4 2025, the net interest margin of commercial banks was 1.42%, unchanged from Q3 and Q2. By institution type, city commercial banks and rural commercial banks had net interest margins of 1.37% and 1.60%, respectively. Amid the continued low levels of net interest margins and the low position of the Loan Prime Rate (LPR), banks face increased pressure to control liability costs.

Xue Hongyan, a special researcher at Su Commercial Bank, told Securities Daily that with multiple reductions in the LPR leading to lower asset yields, small and medium-sized banks, which are more sensitive to liability costs, find it difficult to continue expanding scale through high-interest deposits. This round of rate cuts is not only a follow-up to the previous adjustments by nationwide commercial banks but also a response to regulatory guidance, shifting from scale expansion to cost control and efficiency improvement for high-quality development.

Luo Feipeng stated that in the future, deposit rates for small and medium-sized banks will continue to decline, with long-term product rates possibly decreasing further. The proportion of short-term products may increase, and the phenomenon of interest rate inversion could become more common, reflecting a consensus in the industry that long-term interest rates will remain low. These banks will also pay more attention to optimizing deposit structures, launching differentiated products through digital channels, and improving the precision of liability management.

Xue Hongyan further noted that the future trend of bank deposit rates will depend more on macroeconomic conditions, real-sector financing needs, and the flexible use of monetary policy tools. If relevant factors change significantly, interest rates may adjust accordingly. Under this context, the rate differentiation between banks and among different maturities may persist: institutions with stable operations and less liability pressure might further compress deposit costs, while banks facing greater deposit gathering pressure will adopt differentiated pricing based on their needs. Additionally, the maturity structure of deposit rates may continue to adjust; if ultra-long-term products become less attractive, funds will be further directed toward medium- and short-term deposits, helping banks optimize liability structures and stabilize net interest margins. Overall, bank deposit rates are entering a more flexible, more competitive market-oriented phase.

(Edited by: Wen Jing)