LOCAL BANKS ARE CONSIDERING OFFERING HIGHER-INTEREST DEPOSITS

  • 21/09/2022

Kuwait City: Interest rates on deposits with some banks have recently increased to 4% as a minimum, a historical interest rate for funds that deposits have not reached since around 2008, when they were trading at a barrier even lower than the prescribed Zakat rate of 2.5 percent until the end of last year. The gradual transition of banks from low to high interest rates, compared to the rate circulating at the start of the year and over the previous 14 years, does not appear to be the end of the escalation of the money-attraction pricing fever, as deposit rates are expected to reach 5% and possibly more in the coming months, especially if lending interest exceeds 7%. 


The lending rate for a banker is currently 5.75 percent, compared to 4 percent for depositing, implying that the margin between them has shrunk to around 1.75 percent, a rate that some banks may maintain in the future, and may have to narrow further. Perhaps more than the following considerations, growing expectations about the Central Bank of Kuwait's tendency to raise the discount rate again on Wednesday, in parallel with the prospects of the US Federal Reserve raising the dollar's interest rate on the same day, even if this is gradual, adds to the likelihood of interest rates exceeding 4% again. 

The important thing is that this trend pushes banks to increase the margins they must have in order to cover it in subsequent pricing. — Those banks that officially stated that the new interest rate represents only the minimum ceiling for them indicate the possibility of granting additional interest to some privileged customers, as this reflects their plans to expand the margin soon, especially if the fever of deposits increases and their interests between banks. In Kuwait, changing deposit rates is not the same as changing loan rates.

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