Banks increase loan limits as household debt growth slows
A customer chats with a cashier at a bank in Seoul in this photo released Wednesday. (Yonhap)
South Korean banks have started raising the maximum amount consumers can borrow under a loan to the level before financial regulators intervened to curb the growth of the country’s household debt.
The move comes as the country’s household debt growth has recently shown signs of slowing.
As of Monday, the four major banks here – KB Kookmin, Shinhan, Hana and Woori – have either started raising limits on its overdraft accounts or its most popular loans for salaried customers. The limit on their overdraft accounts was capped at 50 million won ($40,700), while employees could only borrow up to 150 million won since last year.
Woori has decided to increase the account limit of some of its products from the current 50 million won to 30 million won, effective April 4. The limit of its most popular loan for wage earners offered through its mobile banking app, Woori Won Banking, will be doubled from the current 100 million won to 2 million won on the same day.
KB Kookmin has already raised the limit on its overdraft account offered to high-income professionals such as doctors and lawyers to 150 million won, and the same product offered to salaried employees to 100 million won on March 7.
Industry rival Hana also raised the limit on its eight most popular overdraft accounts, including the Hana 1Q credit loan, which it raised to 150 million won earlier this year.
Shinhan is currently considering the timing to follow in the footsteps of its rivals and the decision to increase the loan limit could come as soon as next week, according to industry sources.
Financial authorities have ordered banks to adopt stricter lending rules since 2020, with the Bank of Korea’s record interest rate at the time also lowering lending rates, attracting more borrowers. The BOK ended 15 months of its record high interest rate of 0.5% in August last year by making its first rate hike in the pandemic era. Since then, the BOK has made two more rate hikes in November and January this year, pushing the base rate to 1.25% currently.
Household debt in Asia’s fourth-largest economy hit a new high in the fourth quarter of last year, but grew at a slower pace from the previous quarter due to tighter lending rules, the data shows. from the central bank published last month.
Household credit stood at 1.862.1 trillion won at the end of December, up 1 percent, or 19.1 trillion won, quarter-on-quarter, the data showed. But growth slowed from a 1.9% quarter-on-quarter increase in the third quarter.
By Jung Min-kyung ([email protected])