(Yicai Global) April 25 -- China’s biggest state-owned banks cut the rates on some deposit accounts today, thereby lowering their own borrowing costs, though the central bank's benchmark deposit and loan rates have remained unchanged in recent years.

The cuts mainly range from five to 15 basis points, effective April 25, the same day as a reduction in banks’ reserve requirement ratio comes in, Yicai Global learned from a number of account managers at the banks.

The cuts come after regulators called on lenders to pare deposit rates. Analysts said the lower premiums will help the financial institutions to raise their performance, and are expected to have only a slight impact on the attractiveness of their deposit accounts to savers.

An account manager at a joint-stock bank in Beijing said their three-year fixed deposit rate was cut to 3.45 percent from 3.5 percent, while that on certificates of deposit was pared to 3.5 percent from 3.55 percent. One-year and two-year rates will also be lowered, he said. A counterpart at a large lender in Beijing also said annual rates on various deposit accounts were lowered by 10 bips to 50 bips.

A manager at China Merchants Bank in Beijing also told Yicai Global that the rates on some of the bank’s deposit products have been cut earlier. The annual rate for three-year CDs above CNY200,000 (USD30,700) has decreased to 2.9 percent, the same as the bank’s three-year fixed deposit rate.

If the big four state-owned banks -- Industrial & Commercial Bank, China Construction Bank, Agricultural Bank, and the Bank of China -- trimmed rates by five bips on deposits with a term of more than a year and other banks committed to 10 bips, the banking sector's net interest rate margin, a measure of profitability, would rise by 0.9 bips, according to Qiu Guanhua, chief strategy officer at Zheshang Securities' research institute, and his team.

Small and medium-sized banks with a high proportion of medium and long-term deposits have even more potential to boost their performance, Qiu added.

And as long deposit rates generally fall across the banking sector, the impact on lenders’ ability to attract deposits due to lower premiums should be limited, Dai Zhifeng, director of Zhongtai Securities’ research institute, pointed out.

Costs at smaller banks are expected to fall along with lower deposit rates, providing them with new space to cut interest rates on loans to small and medium-sized enterprises, Dai Zhifeng said, cautioning that the extent of that remains to be seen.

Editors: Tang Shihua, Emmi Laine, Xiao Yi