(Yicai Global) May 16 -- A number of Chinese banks have notified customers of cuts to the interest rates paid on certain deposit accounts, a move analysts predict will likely prompt investors to move funds into insurance and fund-related wealth management products or make early loan repayments.

More than 10 lenders, including Ping An Bank, Guilin Bank, and Bank of Zhengzhou, have lower their rates on notice and agreement deposits, according to announcements they made yesterday. 

The cuts will see money flow into wealth management products such as insurance and funds, benefiting sales of savings insurance products, said Gao Chao, an analyst at Kaiyuan Securities.

Consumer and household investment confidence have not entirely recovered, so the appetite for risk is low, according to Xue Hongyan, deputy head of the Star Atlas Institute of Finance.

So in the short term, there are no deposit products for investors to put their money in other than wealth management products, Xue added. Lower deposit rates also make the early repayment of loans more cost-effective, likely releasing a new wave, he noted.

In the medium term, the stock market recovery and the effect of making money will lead cash to flow from deposits to public funds and wealth management products, further boosting the stock market's rebound, Xue pointed out.

A big state-owned bank told Yicai Global last week that the authorities had issued a notice lowering the upper limit on lenders’ self-regulated deposit interest rates, with state banks barred from exceeding the benchmark rate by more than 10 base points, while others cannot exceed it by 20 bps. The automatic renewal of deposits must also stop, it added.

Yuan-denominated deposits fell CNY460.9 billion (USD66.3 billion) last month from March, with CNY552.4 billion more than a year earlier, according to data from the People's Bank of China. Household deposits tumbled CNY1.2 trillion (USD172.6 billion) in April, CNY496.8 billion more than a year ago.

Editor: Martin Kadiev