Interest rates on low-amount deposits have exceeded 50 percent: Here is the return on 10 thousand liras...

In its texts over the last two months, the Central Bank Monetary Policy Committee (PPK) pointed to the difference in interest rates offered for low-amount savings deposits versus high-amount deposits, signaling that a rebalancing in these rates was necessary.

Following the 5-point interest rate hike at the March PPK meeting, as well as simplification and liquidity withdrawal steps, the interest rate gap between low and high-amount savings deposits in the banking sector began to narrow. So much so that for a 3-month term deposit account, even for savings of 10 thousand liras, the lowest deposit interest rate reached 43 percent, and in some banks, this interest rate exceeded 51 percent. And these rates are applied to all customers, not just new ones. The gap between high-amount savings deposits and low-amount savings deposits, which exceeded 8 points a month ago, has fallen to 4 points in one month.

MUCH LOWER THAN CENTRAL BANK DATA

The Central Bank announces credit and deposit interest rates in its weekly data. However, since the deposit interest rates here include the high interest rates given to accounts converted from FX-protected deposits (KKM), the TL deposit interest rates given to low-amount savings were at much lower levels than the Central Bank data. The Central Bank also drew attention to this difference in the summaries of both the February and March PPK meetings with the following statement:

“It has been observed that the difference between the interest rates offered for low-amount savings deposits and high-amount deposits continues. The effects of these developments on the rebalancing process in domestic demand are being closely monitored.”

BANKS INCREASED INTEREST RATES AFTER THE HOLIDAY

According to reports by Şebnem Turhan from Ekonomim, the Central Bank's demand for a rebalancing in these rates found a response in the market. After the long holiday break, banks increased TL deposit interest rates and brought the interest rates they apply to low and high-amount savings deposits closer together. While a foreign private bank was offering 43.5 percent interest on TL deposits with a maturity of up to 3 months for savings up to 50 thousand liras on March 19, another domestic private bank was offering 41 percent interest. For savings over 5 million liras, the 3-month term deposit interest rate offered by the same banks was between 52 percent and 48 percent. In other words, the difference between low-amount and high-amount deposit interest rates for the same maturity was reaching up to 7-8.5 points.

INTEREST ON HIGH-AMOUNT SAVINGS INCREASED LIMITEDLY

In the week immediately following the Central Bank Monetary Policy Committee meeting on March 21, banks raised deposit interest rates. After the holiday, the rise became more pronounced, and the deposit interest rates applied to high and low-amount savings converged. As of April 19, the interest rate at the same foreign private deposit bank, which was 43.5 percent a month ago, rose to 51 percent, while the interest rate at the other domestic private deposit bank, which was 41 percent, was pulled up to 48.5 percent. These rates are applied to low-amount savings deposits of up to 50 thousand liras. In other words, the interest rate applied to low-amount deposits increased by 7.5 points in one month. And the interest rate given for amounts over 5 million rose to 55 percent at the foreign private deposit bank and 51 percent at the domestic private deposit bank. The 1-month increase in the interest rate applied to high-amount deposits was more limited, remaining at 3 points. In this case, the difference between low-amount deposit and high-amount deposit interest rates fell to 4 points. A month ago, this difference was at twice that level.

The expectation that the rise in deposit interest rates will continue reveals that, with the effect of both KKM conversions and high interest rates applied to high-amount deposits, the 3-month term TL deposit rate rose to 67.48 percent as of the week of April 5, according to Central Bank data. Before the PPK, this rate was at 55.66 percent in the week of March 15. After the PPK on March 21, where a 5-point interest rate hike was made, the average 3-month term TL deposit interest rate rose by almost 12 points according to Central Bank data. Banking sector sources are of the opinion that both the rise in TL deposit interest rates and the rebalancing between low and high-amount savings deposits will continue in the coming days.

SHARE OF STANDARD TL DEPOSITS ROSE TO 43 PERCENT

Weekly data from the Banking Regulation and Supervision Agency (BDDK) reveals that the share of standard TL deposits in total deposits increased after the Central Bank Monetary Policy Committee meeting on March 21. Before the PPK, excluding FX-protected deposits, the sector's standard TL deposits had fallen to 6.4 trillion liras, and their share in total deposits had fallen to 41.97 percent. After the PPK, both standard TL deposits and their share in the total increased. As of the week of April 9, the volume of standard TL deposits rose to 6.7 trillion liras, while their share in total deposits rose to 43 percent.

12.2 PERCENT NET INTEREST RETURN IN 3 MONTHS ON 45 THOUSAND LIRA SAVINGS

If you deposit 45 thousand liras in a 3-month term deposit at a foreign deposit bank with a low savings amount, while it offers you an annual interest rate of 51 percent, your net interest return is 5 thousand 480.4 liras. While the total interest return is 5 thousand 768.8 liras, a withholding tax of 288.44 liras is deducted. Thus, the net interest rate you receive in 3 months is 12.2 percent. It also reveals that if inflation remains below 12 percent in the next three months, you will achieve a real interest return. According to the expectations of the Central Bank and economists, annual inflation is expected to peak at 70-75 percent in May and then enter a downward trend.