Small banks' 'combo deposits' with headline rate of 2.05% spark controversy over actual returns

A new "one-click deposit" scheme that combines fixed-term deposits of varying maturities in a proportional mix has recently drawn significant market attention.

According to a report by International Financial News, these "bundled deposit" products have been circulating among small and mid-sized banks for some time. The recent surge in scrutiny stems from certain institutions prominently displaying a "maximum interest rate" that applies only to a portion of the principal, sparking controversy.

On September 22, a bank representative confirmed to the reporter that its "Combined Deposit" product is currently under "upgrade" and temporarily unavailable for purchase.

Industry experts advise depositors to focus on the actual comprehensive yield when purchasing such innovative products. Comparatively, "Combined Deposits" are better suited for small and mid-sized banks facing intense competition on the liability side and seeking to enhance deposit appeal. The likelihood of widespread adoption remains limited.

Controversy Over Display of Maximum Interest Rates

So-called "Combined Deposits" essentially balance investors' long-term and short-term deposit needs by "arranging and combining" conventional fixed-term products. They use relatively higher product rates as a selling point to attract attention, with some banks selectively raising rates on certain products.

These products are primarily popular among small and mid-sized banks and are not new to the market. The recent controversy stems from how some institutions display interest rate levels.

For example, in early September, Hunan Sanxiang Bank posted a "September Deposit Rate Summary" on social media, recommending 10 deposit products to customers, including two bundled deposit products named "Zunxiang" and "Zungui."

The reporter noted that both products were labeled "multi-term combination, flexible allocation," with an annual interest rate column showing "up to 2.05%." In earlier promotions, the bank prominently highlighted "Enjoy a 3-year 2.05% exclusive rate."

Due to the significant gap between the "maximum rate" and the "actual yield," some analysts believe that using a partial maximum rate as the overall selling point constitutes vague interest rate disclosure and may mislead investors.

In fact, the 2.05% annualized rate applies only to a 3-year fixed-term deposit offered exclusively within the bundled product. This rate is higher than the bank's standard 2-year (2.00%) and 3-year (1.95%) fixed-term deposits. However, in the two combination plans offered by Hunan Sanxiang Bank, this product accounts for only 40% of the total. The remaining portion consists of 1-year and 6-month fixed-term deposits, with interest rates ranging from 1.10% to 1.40%.

On September 22, a customer service manager at Hunan Sanxiang Bank informed the reporter that the product is currently "undergoing an upgrade" and is temporarily unavailable for purchase.

Focus on Actual Comprehensive Returns

In April of this year, the People's Bank of China, along with seven other government departments, jointly issued the Measures for the Management of Online Marketing of Financial Products (hereinafter referred to as the "Measures"). The document sets clear rules on interest rate display in online marketing, including a prohibition on using false or misleading content.

"From a regulatory perspective, promoting a 'maximum rate' is not inherently prohibited. The key is whether the applicable conditions are disclosed completely and prominently," said Shi Shuo, Assistant Researcher at the Fudan Development Institute and Director Assistant of the Fudan-Ping An Macroeconomic Research Center. He noted that the upcoming Measures explicitly include "deposits" under regulation, requiring key information such as interest rates to be displayed clearly and prominently, without material omissions, deliberate concealment, or misleading content. If the maximum rate applies only to a portion of the principal, banks should simultaneously disclose the corresponding proportion, rates for other maturities, and the comprehensive yield, to prevent consumers from interpreting a partial maximum return as the overall return.

"Ordinary depositors can easily mistake the 'maximum rate' for the yield on their entire deposit, which does raise issues of improper disclosure," said Su Xiaorui, Senior Researcher at Suxi Zhijian. "If the contract terms clearly specify the purchase proportion and corresponding rates for each maturity product, but the marketing display fails to disclose the 'comprehensive yield' or 'actual weighted yield' with equal prominence, then there are compliance flaws such as insufficient disclosure of key information and overgeneralization. Accordingly, banks should fulfill a prominent reminder obligation for bundled sales and display the actual interest rate based on the yield, replacing vague terms like 'maximum rate.'"

For depositors, Su Xiaorui recommends that when purchasing such innovative products, they should look past tactics like "maximum rate" and focus on the actual comprehensive yield they will receive. They should also assess whether the liquidity arrangement matches their own needs, avoid obtaining product information solely from financial marketing pages, and carefully review the details of contract terms.

Will Other Banks Follow Suit?

In fact, bundled deposit products are not new to the market.

The reporter found that earlier, local institutions such as Hankou Bank and Liaoshen Bank had also promoted "Combined Deposit" products. Among them, Hankou Bank explicitly offered its product to customers aged 50 and above, with some product rates raised and available only through bundled purchases. The proportion of deposits across different maturities also varies by institution. For example, Hankou Bank set the proportion of 3-year deposits at 60%.

However, such products remain primarily popular among small and mid-sized banks, with no major state-owned banks or joint-stock banks currently participating.

Shi Shuo pointed out that the product logic of "Combined Deposits" essentially splits a single deposit into different maturities: the short-term portion provides depositors with some liquidity while generating returns, and the long-term portion raises the maximum rate in the combination, enhancing deposit appeal while helping banks lock in a portion of longer-term, more stable liabilities. Therefore, these products are more suitable for small and mid-sized banks facing greater competitive pressure on the liability side and needing to boost deposit attractiveness. In comparison, large banks and joint-stock banks have more stable customer bases and richer sources of low-cost funds, such as settlement deposits and payroll deposits. Using complex products to attract depositor funds would actually increase their liability costs, making it an uncommon strategy.

"Looking ahead, it is possible that other small and mid-sized banks may follow suit with 'Combined Deposits,' but the likelihood of large-scale adoption is limited," Shi Shuo noted. "Especially as regulatory oversight of deposit marketing tightens, if products overemphasize the maximum rate while downplaying the comprehensive yield, they may increase compliance and reputational risks. The competitive focus for small and mid-sized banks should shift more toward real comprehensive returns, liquidity convenience, and advantages in matching customer needs, rather than simply showcasing rate attractiveness."