Why deposit rates at private banks are so high

Summary: What is the difference between a private bank and a state-owned bank? Private bank is relative to the state-owned bank to the private main body of capital, its funds are private raised. State-owned banks have more capital and working capital, in their management, business capacity is higher than private banks. Why are the deposit rates of private banks so high? Here to understand. First, the difference between private banks and state-owned banks

1, different funding

State-owned banks are mostly the state out of funds, while the private bank's funds are raised by the private sector.

2, different rules and regulations

Generally speaking, the state-owned commercial banks, (such as the four major banks) is a large scale, while the general size of the private banks and state-owned banks compared to the size of a much smaller.

3, security

State-owned banks have many functions and businesses that are irreplaceable by private banks. Due to the strong strength and background of state-owned banks, private banks are no match for state-owned banks in terms of risk resistance, so naturally the safety factor of state-owned banks is much larger than that of private banks.

For our country, in addition to China's agriculture, industry and construction, the Postal Savings, transportation, and China Merchants, Societe Generale, CITIC, Everbright, Guangfa, Ping An, Pudong Development, Minsheng and so on the rest of the joint-stock banks and all over the agricultural and commercial banks, city commercial banks in fact belong to the state-owned banks, the major shareholders behind them are either state-owned enterprises or the local government, only many people have a misunderstanding for the understanding that in addition to the rest of China's agriculture, construction and all the private banks. is a private bank.

Two, why private banks deposit rates so high

Private banks deposit rates higher than traditional banks for the following reasons:

1, the cost of deposits is relatively low

We all know that since its inception, private banks have been subject to the "one line, one point" supervision, that is, the regulatory agencies Requirements for all private banks to open only one offline network, generally opened in the head office location, so their deposits mainly rely on the online network of deposits, which also eliminates a lot of costs, such as labor, rent, utilities, etc., in the cost of capital compared to the traditional offline network has a strong advantage, the savings can be used to improve interest rates, back to the customer.

2, the average interest rate of private bank loans tends to be higher than that of other offline banks

Most of the private banks give out loans mainly in the form of consumer credit and micro-enterprise loans, and the 1-year interest rate, for example, is roughly in the range of 10-13%, whereas among the other commercial banks, the state-owned and joint-stock banks are about 5%, and the city banks and agribusiness banks are about 6-8%. So, with a certain net interest margin, the higher deposit rates of private banks do not affect their profits in any way despite the higher rates, while other banks are likely to be losing money if they also rashly raise their deposit rates.

3, brand and geographical constraints

Faced with brand and geographical constraints, private banks have to make high interest rates to collect deposits to kill, or jeopardize the survival. China's banking industry is still on the road of scale expansion, the source of profit relies heavily on the deposit and loan spreads, resulting in the deposit of the bank has become a core concept, no deposits without standing, then the private banks (the earliest batch of 2014) from the establishment of only a few years so far, and the small size of the registered capital of 2-4 billion to serve the local economy for the purpose of, and can only be opened in an offline outlets, so the brand effect is rather Weak. In terms of soliciting deposits, if you don't raise interest rates, how can you compete with other banks?

In summary, in order to obtain higher interest rates, the choice of private banks is feasible, but because of its small asset size, profitability and other factors, or to be prudent. As a deposit product, always take into account the protection of deposit insurance regulations is very necessary, even if there are some major risks, within 500,000 will still be subject to full reimbursement, so this type of bank deposits are recommended not to exceed 500,000, high interest rates and no risk, why not?