Why Banks offering attractive FD promotions now? (July 2014)

Once again, we came back to this topic again. The Fixed Deposit promotion offered by various banks lately. Since FD seems to be a form of liability to banks (because banks need to pay depositors interest rate no matter rainy or shiny days), why they still launching FD promotions? What's the rationale behind?


Exposing the mystery ...


  1. Implementation of Basel series:
    The main objective of these series was to strengthen the existing capital and liquidity standard of banks as set and governed by Bank Negara Malaysia. With these series, banks would need to have more capital and liquidity to continue their main business in disbursing loans. So, they need our money being locked for a longer period via FD.

  2. In anticipation of higher interest rate:
    Yes. This is another main reason why banks offering attractive FD rate to tie up your money. Because they foresee that BNM will raise the OPR rate, hence FD rate in the future will rise in tandem. What's wrong if I offer you effective 9 months FD rate of 3.60% when I foresee that same tenure rate may went up to 3.50% eventually ?
At least, banks already lock in your money now and loan it out according to current BLR which will increase in tandem with OPR also. Do you know that BLR increasing with 25 basis points in mid-July, and average FD rate increasing with a lesser extend? So, which side is better off? Depositors or bankers? Another OPR hike in November 2014 ?




Some example of FD promotions by various banks:




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