AZE.US
Banks in Azerbaijan are offering annual interest rates of up to 12% on manat-denominated deposits as they seek to attract more savers amid slowing growth in the number of depositors.
As AZE.US reports, household term deposits increased by 1.2%, or 129.6 million manats ($76.2 million), in June, according to the Central Bank of Azerbaijan.
Total household deposits reached 17.43 billion manats ($10.25 billion), including:
- 12.48 billion manats ($7.34 billion), or 71.6%, held in the national currency;
- 4.95 billion manats ($2.91 billion), or 28.4%, held in foreign currencies;
- 11.34 billion manats ($6.67 billion), or 65.1% of the total portfolio, held in term deposits.
The number of unique term-deposit holders increased by 4,485, or 2.1%, in June. Since the beginning of the year, the number has risen by 26,475, or 13.6%, to 220,600.
To sustain the inflow of household funds, banks have begun raising deposit yields. While manat deposits previously offered returns of around 10% annually, maximum rates have now reached 12%.
Economist Akram Hasanov said to bizim.media, that the strategy was justified because savers primarily consider a bank’s financial stability and the interest rate it offers.
Deposits of up to 100,000 manats ($58,800) per person at each bank are insured, provided the annual interest rate does not exceed 12% for manat deposits. For foreign-currency deposits, the maximum rate eligible for insurance is 2.5%.
“People naturally choose the bank offering a higher return. From a tactical perspective, raising deposit rates is the right approach,” Hasanov said.
Since January 1, 2024, up to 200 manats ($118) in monthly interest income from manat deposits with terms of less than 18 months has been exempt from taxation at each bank.
When a manat-denominated deposit is placed for 18 months or longer, the entire interest income is exempt from tax for three years.
AZE.US