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Demand deposits reach record high on low rates, lack of investment opportunities

South Korea's demand deposits have reached a record high, central bank data showed Saturday, amid an apparent lack of investment opportunities, while the return on long-term bank deposits has also dipped due to record low rates.

As of end-October, demand deposits held by local banks and financial institutions here came to some 201.76 trillion won ($169.97 billion), up 3.4 percent from a month earlier, according to the data from the Bank of Korea.

The October tally marked the first time demand deposits breached the 200 trillion won mark in the country's history. It also marked a 51.1 percent spike from some 133.54 trillion won in October 2015.

Demand deposits refers to funds held in accounts from which deposited funds can be withdrawn at any time without any prior notice.

Market analysts attributed the sharp increase in demand deposits to what they called an apparent lack of investment opportunities.

The country's money supply has been on a steady increase since the central bank lowered its policy rate to a record low of 1.5 percent last year, and again to 1.25 percent in June.

"Demand deposits appear to have increased as long-term deposits yield little in return due to record low rates, increasing the opportunity cost of people making such long-term commitments," a BOK official said while speaking on the condition of anonymity.

The rise in demand deposits has also been attributed to a dip in fresh corporate investments.

According to an earlier survey of 3,550 local firms conducted by local industry leader Shinhan Bank, South Korean companies have so far reduced their investments by 0.8 percent on-year to 179.4 trillion won. (Yonhap)

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