The game theory called "tit for tat" is a repeated game in which a company will follow its competitors' strategies either indefinitely or for a certain period.

For example, Company A sets a price for a product at a high level and maintains it for so long that Company B, its competitor, agrees to join and charges the same high price.

Later, Company B decides to lower its price and Company A follows suit and lowers its price. If Company B decides to raise its price again, Company A will immediately raise its price too. This process is accompanied by speculation on price movements between the two companies.

This strategy is normally followed for pricing in an oligopoly market - one with a small number of competitors. The Thai banking sector, despite having more than 10 players, practically acts as an oligopoly because a few active, big-sized banks lead the market.

The tit-for-tat strategy has been partly adopted by the banking system in the current environment of rising interest rates. At the same time, the banking system is seeing lower liquidity and significantly lower loan expansion.

After raising their interest rates gradually last year, competition between the banks became aggressive at the beginning of this year. Large banks continue to be leaders for rate changes, followed by the smaller banks.

March was a month of continuous rate hikes. Banks pushed the rates up three times, surprising customers who, despite the economic environment, didn't expect the rates to escalate as rapidly as they did. Depositors and debtors were offered carrots and sticks, respectively.

Then the competition became really fierce. Krung Thai Bank (KTB), the second-largest bank in terms of assets, offered 4.25 per cent per annum for nine-month fixed deposits. It ushered in a tit-for-tat game involving special packages in the battle to hold on to customers and attract new depositors.

Kasikornbank (Kbank) and TMB Bank (TMB) introduced eight-month fixed-deposit accounts offering 4.5 per cent per annum. Then Siam City Bank (SCIB) offered 4.5 per cent per annum for seven-month fixed deposits.

Some banks have attached conditions to their special savings packages. Bangkok Bank (BBL), the largest bank in terms of assets, offers a highly attractive 5.125 per cent a year for 10-month fixed deposits with a minimum deposit of Bt100,000. Bank of Ayudhaya wants a minimum of Bt50,000 on its 4.5-per-cent per-annum eight-month fixed deposits.

Smaller banks, new banks and state-owned banks have also jumped on the bandwagon, with special offers from Thanachart Bank, the Government Housing Bank (GHB), and the Bank for Agriculture and Agricultural Cooperatives.

Bank Thai is offering a fixed rate of 5 per cent for six-month fixed deposits and GHB recently launched a rate of 5.35 per cent for 12-month deposits with a minimum of Bt100,000.

These banks are not only keen to accept deposits from new customers, but also to offer other financial products in the near future, including insurance, car loans and personal loans.

It is not easy to offer such products directly to new customers who have brand loyalty to other bigger banks. But after becoming depositors it is expected they will more readily accept other services.

KTB, the first bank to launch a "special savings package", succeeded in scooping up Bt66 billion. Those who followed haven't been so successful. TMB attracted Bt14 billion in new deposits within 20 days, but SCIB wooed only Bt6.7 billion in a month.

However, it is not necessary for those that follow to provide better offers to customers than the leaders. What is important is that the concept of the tit-for-tat strategy has been introduced.

Savers should take into account a host of factors, including interest rates, maturity, number of branches and efficiency of services before making any decision.

Kbank, TMB and SCIB have all offered 4.5 per cent a year, but with different terms. In reality, depositors with Kbank and TMB will receive 3-per-cent interest when it is calculated over the eight-month deposit period and those at SCIB will receive 2.625 per cent over the seven-month deposit period.

Thanachart's customers will get 3.94 per cent for a nine-month deposit, while BBL's depositors will receive 4.27 per cent over the 10-month deposit period.

A third round in the battle of the banks began before Songkran, and was led by Siam Commercial Bank (SCB), TMB and Kbank.

It is too early to conclude who will win this tit-for-tat game.

Perhaps the winner will not be the bank that attracts a lot of money from depositors with attractive offers, but the one that is able to provide a lot of money for new loans amid the present dull economic atmosphere with its slowdown in consumption and investment.

Anoma Srisukkasem

The Nation