Customers line up at a branch of KB Kookmin Bank in Seoul. (Yonhap)
KB Kookmin Bank, one of the five major commercial banks here, has decided to cap the amount of personal loans per household at 20 million won ($18,000), sources said on Tuesday, marking a sweeping move as lenders locals have tightened their grip on lending rules. .
KB Kookmin plans to maintain the new limit at least until the end of the year, industry sources said. The rule applies to any household applying for a new personal loan or looking to increase their loan balance from Tuesday through December 31. This follows its previous decision to cap the amount of personal loans granted offline at 100 million won until the end of the year.
The bank’s decision is part of a series of lending regulatory measures announced by local lenders, after financial authorities warned them to better manage household credit earlier this year.
South Korea’s household debt growth has seen a notable acceleration this year due to the heat of the housing market and the COVID-19 pandemic. The value of outstanding bank loans to local households rose by 13.6 trillion won in a month in November alone, to 982.1 trillion won, according to recent data from the Bank of Korea. It’s the largest monthly gain since the central bank began compiling such data in 2004.
Traditional and internet-only banks have reduced credit limits and capped overdraft accounts – a popular commodity among households and office workers here – since last month.
Since mid-November, the Big Five banks have begun lowering limits on their major overdraft products designed for “high-income individuals and professionals” from an average of 200 million won to around 100 million won. .
Shinhan Bank, KB Kookmin’s industrial counterpart, lowered its credit limit for such high-income earners to 200 million won from the previous 300 million won, without saying when it plans to raise the limit again. Woori Bank has also temporarily suspended the extension of one of its most popular loan products for office workers.
Internet-only banks Kakao Bank and K bank have jumped on the bandwagon in recent days, further eliminating options for borrowers.
Bank K on Monday raised its annual percentage rate for two of its most popular loan products – one for office workers and another for overdraft accounts – by 0.2 percentage points to 2.44% and 2.88%, respectively.
Kakao Bank, meanwhile, last week announced a temporary halt to opening overdrawn accounts. It plans to stop accepting applications until December 31.
About these lending regulations, experts fear this could push households and borrowers into riskier products offered by second- and third-tier financial institutions such as savings banks and private lenders.
“There is a need to manage the short-term increase in household debt, which could lead to long-term economic stagnation and weak growth,” said Cho Young-mu, a researcher at the LG Economic Research Institute.
“But the side effects of government interference in the risk management of financial institutions have been evidenced by the lack of extension of lending to areas where money needs to flow,” he added. .
By Jung Min-kyung ([email protected])
