Financial Sector Loan Maturity and Interest Repayment Grace Period Extended by 6 Months Until March Next Year

All Financial Sectors Until March 31 Next Year
Financial Services Commission "Consensus with Financial Sector"

[Asia Economy Reporter Kim Hyo-jin] The financial sector's loan maturity extension and interest repayment deferral measures, implemented in response to the impact of the novel coronavirus infection (COVID-19), will be extended for an additional six months until March next year. This decision follows the government's and financial authorities' assessment that the rapid resurgence of COVID-19 could further exacerbate the financial difficulties of small business owners and small and medium-sized enterprises (SMEs).

The financial sector broadly agrees on the necessity of these measures but expresses concerns about the potential accumulation of non-performing loans.

On the 27th, the Financial Services Commission announced that the temporary measures for loan principal repayment maturity extension and interest repayment deferral, implemented by all financial sectors including policy financial institutions, commercial banks, insurance companies, credit finance companies, credit unions, fisheries cooperatives, forestry cooperatives, and Saemaeul Geumgo, will be extended from the end of next month to March 31 of next year.

Financial Services Commission

Accordingly, small business owners and SMEs affected directly or indirectly by COVID-19 can apply for loan maturity extensions and interest repayment deferrals at financial institutions even after October.

This applies to loans received before March 31 of this year, and applicants must not have factors indicating insolvency such as delinquency in principal and interest payments, capital erosion, or business closure. Regardless of the repayment method, whether lump-sum or installment, the measures can be applied for a minimum of six months from the application date.

Even if a loan maturity extension or interest repayment deferral has already been applied for, reapplication is possible if the maturity or deferral period expires within the extended deadline.

For example, if a borrower whose loan matured at the end of May this year received an extension until the end of November, they can reapply in November to receive an additional extension of at least until the end of May next year.

The Financial Services Commission reported that as of the 14th, a total of 246,011 cases amounting to 75.7749 trillion won in loan maturity extensions and 9,382 cases amounting to 107.5 billion won in interest repayment deferrals have been implemented in the financial sector.

Financial Sector Concerns Over 'Potential Non-performing Loan Accumulation'
Financial Services Commission Responds to Calls for 'Interest Repayment Only' with "Burden Not That Large"

The Financial Services Commission explained that between last month and this month, it held three official meetings with the financial sector and, through discussions with financial institution practitioners, reached a consensus on the blanket extension of loan maturity extensions and interest repayment deferral measures.

While the financial sector acknowledges the need for active financial support to overcome the COVID-19 crisis, it has pointed out concerns about potential non-performing loans that may materialize in the future. In particular, commercial banks have reportedly repeatedly expressed to the Financial Services Commission the need to reconsider even just the extension of interest repayment deferral measures.

A commercial bank official said, "Borrowers who cannot even pay interest risk falling into a vicious cycle of delinquency, so it is more reasonable to reveal the risk so that both the bank and the borrower can manage it."

The Financial Services Commission stated that considering the performance of interest repayment deferrals, the burden is not that large.

This content was produced with the assistance of AI translation services.