Cash-hungry Turkish banks raise rates to highest since crisis

Turkish banks, hungry for deposits to finance growth in loans, are offering the highest interest rates on lira deposits since the aftermath of the global financial crisis.

Banks are offering an average of 11.75 percent annual interest on one-month deposits, data provided by Bloomberg HT television showed on Monday. Average interest rates on overall deposits were 12.81 percent as of the end of March, it said, citing data from the country’s central bank.

Turkish bank deposits rates

Turkish President Recep Tayyip Erdoğan is calling on banks to lend more money to the economy to help spur growth ahead of elections next year. But Turkey’s inflation rate, currently 10.2 percent, has become sticky in double digits, meaning interest rates on loans have also risen toward 20 percent annually, curbing demand from businesses and consumers. The banking industry had benfitted from government loan guarantees in 2017, helping loan growth.

Huseyin Aydin, head of Turkey’s banking association, said deposits in Turkey are now growing faster, narrowing the gap between total deposits and total loans. This is good news for the health of the industry, he said, according to Bloomberg HT.

The loan-to-deposit ratio of Turkey's banking industry, which comprises more than 50 banks, exceeds 120 percent, one of the highest rates in emerging markets, and above the rate of about 115 percent in Europe.