Small banks have begun to launch new special fixed-deposit campaigns, offering higher interest rates as they predict an interest rate hike in the second half.
Thai Credit Retail Bank initiated a 17-month fixed-deposit campaign with an interest rate of 1.7% per year. The product is aimed at new deposit customers.
The bank requires a minimum deposit to open the account of 70,000 baht and each additional deposit must be at least 1,000 baht. The campaign limits total deposits to 7 million baht per depositor. It runs until the end of this month.
CIMB Thai Bank (CIMBT) launched a 24-month fixed-deposit promotion, offering an interest rate of 1.75% per year. The campaign is for the bank's CIMB Preferred wealth customers, requiring a minimum deposit of 50,000 baht. It runs until the end of this month.
Recently banks have stopped offering fixed interest rates for mortgages and raised auto loan interest rates for some products.
The move is in line with higher financial costs as Thai interest rates are expected to increase.
Analysts forecast the Bank of Thailand will raise the policy rate from 0.50% in the second half of this year to rein in persistently high inflation.
Bhudinan Sethanandha, executive vice-president of CIMBT, said the bank wants to expand the deposit base with a higher-rate fixed-deposit campaign before its peers as interest rates are projected to rise.
CIMBT forecast the central bank's Monetary Policy Committee will raise its policy rate in August, yet the banking sector is not expected to immediately increase prime interest rates for either deposits or loans following the rate hike.
The sector's interest rate movement is led by state-owned banks after a policy rate adjustment, followed by large commercial banks, Mr Bhudinan said.
Given the slow economic recovery and high inflation rate, banks' interest rate movement is expected to be delayed longer than normal following a policy rate adjustment, he said. In addition, banks need not immediately increase deposit rates because there is plentiful liquidity and loan growth is slow, said Mr Bhudinan.
Total deposits in the banking industry have been rising the past two years because they are considered a safe haven compared with investment instruments amid the pandemic and higher economic uncertainty.
According to Stock Exchange of Thailand data, total deposits outstanding for the 10 SET-listed banks stood at 14.7 trillion baht as of May, rising 2.76% from the end of December last year.
Mr Bhudinan said banks are more focused on digital savings accounts as competition in this arena intensifies. Though digital savings deposits represent a small portion of the sector's total deposit portfolio, banks keep expanding their deposit base of younger depositors via digital platforms, in accordance with changing customer behaviour.
Thanyalak Vacharachaisurapong, deputy managing director of Kasikorn Research Center, said the competition for fixed-deposit campaigns this year would not be as intense because of the abundant liquidity of the banking industry.
The new fixed-deposit campaigns are expected to focus specifically on sub-segment depositors, depending on bank strategies, said Ms Thanyalak.
Some banks will wait for the actual policy rate hike in August to gain a clearer picture of the economic recovery before raising prime interest rates for both deposit and loan rates, she said. Banks need to consider the debt payment ability of customers amid the slow rebound, said Ms Thanyalak.