AZE.US
Banks in Azerbaijan are keeping deposit rates relatively low even as borrowing costs remain high, deepening frustration among customers who see little reward for saving and growing pressure when taking out loans.
The imbalance has become more visible in recent months. While credit has become more expensive, returns on household deposits have stayed largely unchanged. For many consumers, that has reinforced the sense that banks are quick to raise lending rates but far less willing to improve terms for depositors.
Banking expert Ismayil Mammadov says the ceiling for protected deposits currently stands at 12%, but actual offers from banks are mostly in the 9% to 11% range. He says deposit pricing depends on the Central Bank’s policy rate and the country’s real inflation level.
A key reason, he argues, is that banks now have access to cheaper sources of funding and therefore have little incentive to raise the rates they offer to households. In other words, if banks can secure money at lower cost elsewhere, they are less interested in competing aggressively for public deposits.
That helps explain why deposit rates have not moved higher even as many borrowers complain that loans have become more expensive. Lower inflationary pressure and broader monetary conditions have also reduced the case for any sharp increase in deposit yields.
MP Vugar Bayramov says that if banks are attracting deposits more cheaply, that should also be reflected in lower lending rates. A significant share of bank lending is financed through deposits, meaning cheaper funding should, in principle, lead to cheaper credit.
But that is not what the market is showing in 2026. According to Bayramov, banks are paying less on deposits while loan rates have not fallen in any meaningful way. That, he says, points to the need for a better balance between deposit and lending rates, especially as banks continue to benefit from lower funding costs.
The issue is especially sensitive for lending to the real sector, where high borrowing costs can weigh on business activity, investment and broader economic growth.
The maximum rate threshold for protected deposits in Azerbaijan was last raised in 2015, when it increased from 9% to 12%. But that limit does not force banks to raise the rates they actually offer, nor does it automatically make loans cheaper.
For now, the market continues to work more in favor of banks than customers. Lenders are still able to attract relatively cheap money and sell it back at much higher rates. Unless competition intensifies or the regulator exerts more pressure, that gap is likely to remain.
AZE.US