Early withdrawal of installment savings shot up in South Korea due to the coronavirus-induced financial stress and record-low interest rate.

According to Maeil Business Newspaper on Sunday, the nation’s four major commercial banks – KB Kookmin, Shinhan, Hana and Woori – have seen 21.76 trillion won ($17.7 billion) withdrawals in installment savings before their maturity from February 1 to May 22, up 15.5 percent from the same period last year at 18.85 trillion won.

Customers are closing their savings accounts despite early cancellation penalty amid economic hardships by COVID-19.

Also bank savings are rapidly losing appeal as the central bank slashed the base rate to a fresh low of 0.5 percent last week. An installment savings account yielding 0.7 percent interest upon 1-year maturity generates just 59,220 won in interest income after tax.

The volume of floating money including demand deposits topped 1,100 trillion won as of May 22, reaching an all-time high as there are no attractive investment opportunities. The outstanding balance of demand deposits at the four commercial lenders jumped 15.6 percent from the end of last year to 427.98 trillion won on May 22.

By Moon Il-ho and Choi Mira

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]