Amid the relatively high returns offered by banks, savings in term deposit accounts increased by Sh124.8 billion in the first seven months of this year to over Sh2 trillion.
According to Central Bank of Kenya (CBK) data, cash in fixed deposit accounts stood at Sh2.03 trillion in July, an increase of Sh48.1 billion compared to June.
Term deposits and savings deposits (cash in term deposits) are growing faster than demand deposits, indicating a growing desire to benefit from the higher returns offered to Kenyans.
Term deposits have higher interest rates than regular deposits. According to official data, the yield on fixed deposits of commercial banks averaged 11.28%, while the yield on demand deposits was 4.56%.
Only demand deposits recorded a decline in growth rate, with term deposits increasing to Sh2.03 trillion on the back of high interest rates offered by banks competing with other investment classes.
Financial institutions had an average return on long-term deposits of 11.28% in July, and the average return in June was 11.48%, a record high.
Notably, the interest rates offered by commercial banks were above the inflation rate, which was 4.3% for 13 consecutive months, indicating lenders’ intention to attract individuals with cash.
deposit interest rate
The difference between deposit interest rate and inflation is the real interest rate, which was 6.83% for the month and had a positive return over the past 13 months.
As a result, returns on both savings and savings accounts benefited significantly from the upward revision in domestic interest rates, which began with the CBK raising its benchmark lending rate to manage persistently high inflation and exchange rate fluctuations. enjoyed it.
However, the CBK lowered the interest rate from 13% in February this year to a lower threshold of 12.75 in August, and then settled at 12% in October, setting the stage for a decline in domestic interest rates. This will have an impact on the returns paid to savers in the commercial sector. bank.
