RANGOON — Some of Burma’s leading private banks are set to raise interest rates on savings accounts in the hope of attracting new savers, according to Bankers.
Four of the country’s 20 private banks—Kanbawza (KBZ) Bank, Asia Green Development Bank, CB Bank and Myanmar Apex Bank—are said to be planning to set rates for savings deposits at 8.25 percent from Aug. 1, up from 8 percent.
Burma’s Central Bank permits banks to offer up to 10 percent interest to savers, and fixed deposit accounts already yield 10 percent.
The four banks, which are among the largest in the market, are looking to draw in new customers in a growing economy where few people currently save with formal financial institutions. A recent UN-led survey of access to finance found that only 4 percent of people in Burma have savings accounts at a bank.
Than Lwin, the vice chairman of Kanbawza Bank, said the major banks were looking to attract new savers.
“The major intention is to attract our regular customers and newcomers. Actually, we can increase the interest up to 10 percent for savings deposits, but we’ve decided to raise it only a little amount because if we increase it too much, smaller banks will be faced with a problem in the market,” Than Lwin told The Irrawaddy.
Interest rates on loans would remain at 13 percent for customers at all banks, he said.
While savers would welcome competition in the banking sector, which could usher in more favorable terms for customers, the banks are all members of the Bankers Association, and rate rises are limited by the need for broad agreement.
The country’s other private banks are thought to be considering whether to follow the four large banks’ 0.25 percent rate rise.
Chit Khine, chairman of the Myanmar Apex Bank, said the bank had to follow its competitors in increasing the interest rate to avoid losing customers.
“Though the increase is little, we have to remain attractive to our customers not to lose. This amount has been agreed by all bankers in the Bankers Association, which looks at all sectors. The competition in this market is very strong at the moment,” he said.
Banks have been criticized for making large profits, given the gap of a full 5 percent between savings and lending interest rates. But Chit Khine said Central Bank rules around how much a bank can lend out, relative its deposits, limit how much money banks make.
“We’re criticized from outside that we’re taking a lot of profit between saving deposit rates and loans rates. Actually, we’re only allowed to lend out 70 percent of our total savings deposits, so our service charge is really only 9.1 percent,” he said.