South Korean banks saw in January the sharpest drop in lending and deposit rates in more than 10 years with the government's steep cut in interest rates, the Bank of Korea (BOK) said on Friday.

The average lending rate for households and companies hit 5.91 percent in January, down 0.98 percentage point from the previous month, according to the BOK.

It was the largest monthly drop since November 1998 when the rate plunged by 1.04 percentage points.

On the other hand, the average deposit rate dropped to 4.16 percent in January, down 1.42 percentage points from a month earlier.

It posted the biggest monthly fall since August 1998 when the rate made a 1.89 percentage point drop.

"The decline in local banks' lending and deposit rates can be attributed to the BOK's key rate cut, which in turn drove down market rates like yields on certificates of deposits," said an official at the BOK.

Since last October, the BOK has consecutively cut the interest rate by a total of 3.25 percentage points, to put it at a record low of 2 percent.

(Xinhua News Agency February 27, 2009)