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Reduced Interest Rates on Savings Accounts

Published: August 9, 2013 | 12:47 pm
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Why are banks reducing interest rates on deposits? Recent period has seen a reduction of interest rates on savings accounts across the banking sector. Directors of VTB and Liberty banks have pointed to the excess inflow of money as one of the main reasons for the reductions. According to the Director General of VTB Archil Kontselidze, the bank has lowered its interest rates from 11% to 9.5%, and the reduction in lending on the market has also played a part in the decision. The Director General of Liberty Bank Giorgi Arveladze has stated that they had to go along with the overall trend on the market in reducing the interest rates to 13%. Giorgi Tsutskiridze, the Deputy Chairman of the Association of Georgian Banks, has added that lower interest rates on loans and lower inflation have contributed to the reduction of interest rates on the savings accounts.
TV3 has found out that the lowering of interest rates on savings accounts has led to an influx of clients to alternative financial institutions. The head of the First Credit Union Gigi Korinteli has stated that the influx of clients from the banking sector is evident, due to the 14% interest rates on the savings account which the credit union offers. The number of clients switching from the banking sector to the First Credit Union has increased by 10% during the summer. However, the reduction of interest rates has affected them too. According to Mr. Korinteli, the trend which was initiated within the banking sector has spread across the market as a whole.

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