By Gabriel Chen

BAD news for the legions of savers already being squeezed by the meagre interest paid out on their deposits.

Today, interest rates on the millions of savings accounts at both DBS Bank and POSB will be trimmed to levels not seen since 2005.

POSB savings and passbook account holders, who previously got 0.25 per cent for the first $50,000, will now get just 0.125 per cent.

For those holding a deposit of $10,000, the decrease works out to $12.50 less a year.

Prior to today, DBS Savings Plus account holders got between 0.125 per cent for the first $3,000 and 0.175 per cent for the next $47,000. But now they will get only 0.1 per cent for the first $50,000.

From 2003 to 2005, DBS and POSB savings account-holders received about 0.125 per cent for the first $50,000.

Those rates were later revised upwards.

A DBS spokesman said that the interest rates on deposit accounts, such as DBS Autosave, DBS Savings Plus, POSB Passbook and MySavings Account, will be adjusted from today.

'In line with market practice, we are informing our customers via notices at the branches, on ATM receipts and statements and on our website,' he added.

DBS and POSB are not the only ones reducing their rates to near zero. Over the last few months, many other banks - both foreign and local - have cut their payouts, some in lockstep, some one after another.

United Overseas Bank pays 0.125 per cent for the first $15,000 in savings, while OCBC Bank offers 0.125 per cent for the first $10,000. These rates were adjusted in early April, following a rate adjustment by DBS, a banker said.

The foreign players are also currently paying very little. Standard Chartered Bank's passbook savings account gives savers 0.125 per cent for an amount between $1,000 and $2,500.

Deposit rates are falling along with the rate that banks pay one another to borrow cash - the Singapore Interbank Offered Rate (Sibor).

Sibor is a key influence on the rate that banks pay depositors and is hovering at 0.68 per cent, near the all-time low of 0.56 per cent in June 2003.

Another factor causing the low rates is that most Singapore banks do not need to attract deposits given that they are not looking to significantly expand their loan books during the downturn.

A local banker, who spoke on condition of anonymity, did not rule out that Singapore dollar saving deposit rates could head to zero, albeit unlikely. For DBS and POSB, it is unlikely they will go that low given that they have the interests of the community to consider and the largest share of retail customers' deposits here, he said.

While some consumers are upset by DBS and POSB's move, others are indifferent as current rates are already languishing at rock bottom. 'If they want to cut rates, they better make sure that their home loan rates are competitive,' said Ms Gen Teo, a 29-year-old property consultant.

Mr Leong Sze Hian, president of the Society of Financial Service Professionals, said that consumers who want better-yielding alternatives could consider putting money in cooperatives or money market funds.

This article was first published in The Straits Times.