With the first policy rate hike in over seven years seemingly imminent, small banks are vying for deposits by offering special time-deposit products to lock in cheap funding costs.
CIMB Thai Bank (CIMBT) is offering a 2.5% interest rate, probably the industry's highest rate for 24-month fixed-deposit accounts, said senior executive vice-president Adisorn Sermchaiwong.
The product caps deposits at 50,000 baht per month, up to 1 million throughout the 24-month period.
The bank aims to raise 6 billion baht worth of new deposits from the fixed-deposit offering by the end of the year, Mr Adisorn said.
CIMBT also offers 1.65% and 1.7% for five-month and 12-month fixed-deposit products, respectively.
Mr Adisorn said the new deposit accounts aim to diversify the affluent customer base and raise the deposit ratio, in addition to locking in a low interest rate ahead of the policy rate hike.
The strategy is also to prepare for the Bank of Thailand's liquidity coverage ratio (LCR) regulation, though the bank's LCR of 120% is higher than the central bank's requirement of 80%.
The regulation will require banks to raise LCR to 90% in 2019 and 100% in 2020.
Wealthy clients contribute to the bank's largest portion of deposits, and most of their money is put in time-deposit accounts, which could impact the bank's LCR if large withdrawals are made, Mr Adisorn said.
The bank's current account and savings account (CASA) represents 25-30% of total deposits outstanding, which CIMBT aims to raise to 30-35% next year to sustain the bank's liquidity.
The loan-to-deposit (LTD) ratio of around 95% is another key reason behind the bank's drive to raise new deposits, Mr Adisorn said.
Outstanding deposits are 106 billion baht, targeted to increase to 112 billion by year-end and 124 billion next year.
New deposit mobilisation from small banks, including CIMBT, will not intensify competition in the market, given the excessive liquidity, Mr Adisorn said.
"The banking industry's deposit competition will begin when lending growth reaches 4%, but growth is now 1-2%," he said. "CIMBT has not competed for deposits over the past few years."
For the first 10 months of the year, CIMBT showed strong retail loan growth, mainly driven by mortgages. New housing loans jumped 42.9% from the end of last year to 20 billion baht at the end of October and raised the mortgage portfolio to 70 billion baht.
Mr Adisorn said the bank will not be affected by the central bank's macroprudential policy for the housing loan market, to be imposed from April next year.
The bank expects to deliver higher-than-targeted mortgage growth this year, he said without identifying the target.
Land and Houses Bank (LH Bank) offers a step-up rate for 25-month time-deposit accounts.
Depositors will receive 2% for the first 12 months, 2.3% for the second year and 2.5% for the 25th month.
Kiatnakin Bank is another bank that has launched a 25-month time-deposit account with a 2.05% interest rate.