The China Post
Banks say they are launching these promotions partly to reward their customers, and partly to encourage the habit of thrift in a low interest rate environment.
“Recognising that the interest rate environment offers low returns, we offer promotions from time to time to motivate customers to save,” said Ms Chng Bee Leng, OCBC’s head of deposits.
Ms Helen Neo, head of consumer banking at Maybank Singapore, said its incremental interest rate is essentially a reward for the above-50 market segment.
However, some analysts say banks are offering these schemes because they increasingly appreciate the value of a strong deposit base.
“The big lesson from the recent global financial crisis is that interbank funding can be fickle and can seize up during times of distress,” said CIMB-GK analyst Kenneth Ng.
“New regulations for the global financial sector are attempting to solve the problems in the 2008 credit crisis and are proposing to push through a stable funding ratio requirement for all banks. That will heighten the importance of deposits for banks and naturally, spur greater competition towards deposit-collecting initiatives,” he added.
Deposit rates are almost zero as the benchmark three-month Singapore Interbank Offered Rate — the rate at which banks lend to one another, which serves as a handy benchmark for all kinds of rates here — is hovering near its all-time low.
While financial advisers welcome the higher rates, some are critical about the banks’ apparent discrimination against existing account holders who will still receive the lower prevailing interest rate.
“If other banks follow suit (with promotions), does it mean that we should not put all our funds in one bank, so that we have ‘fresh funds’ to get up to seven times more interest, as is the case in this new type of fresh funds promotion?” asked Mr Leong Sze Hian, president of the Society of Financial Service Professionals.
“I think we need to consider the principle of recognising and rewarding loyal existing customers, instead of discriminating against them and sidelining them to lure new customers.”