The upcoming Singapore Savings Bonds and stricter rules on how much capital banks must hold may be driving lenders to offer enticing promotional rates for fixed deposits.
A shortage of funds on deposit available to banks for lending might also have prompted them to step up the competition for cash.
Putting $25,000 into a 12-month fixed deposit now yields 1.5 per cent at OCBC and 1.45 per cent at Maybank, up from around 0.25 per cent to 0.7 per cent a year.
Ms Kum Soek Ching, head of South-east Asia research at Credit Suisse, noted that banks could be offering promotions to prepare for the sale of the Singapore Savings Bonds (SSB), which could attract investments that would normally go into a fixed deposit.
The bonds offer investors with a longer horizon a higher yield than fixed deposit rates, she said.
Singapore Savings Bonds will start being issued in October and have a term of up to 10 years. They offer yields linked to long-term Singapore Government Securities, which have been between 2 and 3 per cent over the past 10 years.
SSBs will start being issued in October and have a term of up to 10 years.
They offer yields linked to long-term Singapore Government Securities, which have been between 2 and 3 per cent over the past 10 years.
Dr Chua Hak Bin, head of emerging Asia economics at Bank of America Merrill Lynch, noted that the sale of SSBs would "intensify competition for retail deposits and pressure rates higher".
He added that the Government intends to issue up to $4 billion of bonds this year, an amount roughly equal to the increase in retail deposits over a six-month period.
But some analysts believe SSBs will likely only marginally impact bank deposits in the short term.
Mr Kumar Rachapudi, senior rates strategist for Asia at ANZ Research, said the amount of SSBs to be issued this year is small compared to total bank deposits, which are about $550 billion.
The total bank deposits would at most be reduced by the amount of SSBs issued - only up to $4 billion - he added.
Furthermore, retail investors are allowed to buy only up to $100,000 worth of SSBs, he said, adding: "There is no such cap on deposits."
Increasing liquidity requirements may also pressure foreign banks into raising rates, analysts here noted.
Foreign banks deemed systemically important - such as Citi, HSBC, Maybank and Standard Chartered - will have to hold more high quality assets, like deposits, from January next year, noted Mr Chan.
Ms Kum added that foreign banks could feel the pressure of increased deposit competition more, as they have a much smaller base of low-cost Singdollar deposits.
However, local banks enjoy this larger base because of their home town advantage.
The reduced pace of retail deposits, in the light of slower economic growth and a rate hike in the United States, would put further pressure on short-term rates, Dr Chua said.
Local and foreign banks The Straits Times spoke to said their promotions were part of regular efforts to keep fixed deposit interest rates competitive.
They also said they expected the SSBs to complement, not compete, against fixed deposits.
Mr Matthew Colebrok, head of retail banking and wealth management at HSBC Singapore, said fixed deposits offered investors flexibility on terms while not limiting deposit amounts.
They complemented saving bonds, which are used to meet long-term needs, he added.