Banks to Block Credit Loans with 'Double Salary' for High-Income Professionals

Credit Loan Limits Reduced to Half Level

[Asia Economy Reporter Park Sun-mi] From now on, it has become practically difficult for high-income professionals to receive credit loans exceeding twice their annual salary from a single bank. This is due to banks entering voluntary management of credit loans following the government's 'warning' over concerns about the inflow of real estate funds through debt investment (debt-financed investment) and Eoljuka (borrowing to the limit of one's soul).

According to the banking sector on the 13th, Shinhan Bank decided to reduce the credit loan limit ratio against income for certain professional groups from the existing 300% to 200%, effective from the 19th. Accordingly, the maximum credit loan limit for high-income professionals at Shinhan Bank will be lowered to 200% or less. However, the absolute credit loan amount limit, which is around 200 million to 300 million KRW depending on the professional sub-sector, will remain unchanged. Additionally, Shinhan Bank set the maximum overdraft limit for professionals from unlimited to 100 million KRW.

Hana Bank also reduced the loan limit of its main non-face-to-face credit loan product 'Hana One Q' from a maximum of 220 million KRW to 150 million KRW starting from the 8th. KB Kookmin Bank cut the credit loan limit for professionals from a maximum of 400 million KRW to 200 million KRW starting from the 29th of last month, and reduced the 'KB Workplace Support' credit loan limit from a maximum of 300 million KRW to 200 million KRW. The limit for the non-face-to-face credit loan product 'KB Star Credit Loan' was also halved from 300 million KRW to 150 million KRW.

In the cases of Hana Bank and KB Kookmin Bank, the absolute credit loan amount limits were lowered rather than the ratio against income, but since the average annual salary of professionals is generally over 100 million KRW, the recent reduction in loan limits by banks effectively blocks credit loans exceeding twice the annual salary. A representative from a commercial bank explained, "Even for professionals, it has become almost impossible to receive credit loans over 200 million KRW under their personal name."

As banks manage the total volume of credit loans, to avoid blocking credit loans intended for living expenses of households struggling due to COVID-19, the only option is to reduce preferential interest rates (interest rate reduction benefits) and limits amounting to several hundred million KRW, which are mainly received by high-income and creditworthy borrowers.

With banks entering voluntary management of credit loans, the brake on the increase in personal credit loans is likely to continue for the time being. Excessive credit loans in the banking sector have become a target of financial authorities' regulations, and as of the end of last month, the balance of personal credit loans recorded 126.3868 trillion KRW, showing a slowdown in growth. The month-on-month increase in major banks' credit loan balances was 2.8374 trillion KRW at the end of June, 2.681 trillion KRW at the end of July, and surged by 4.0705 trillion KRW in August compared to the previous month. However, at the end of last month, the increase was limited to 2.1121 trillion KRW compared to the end of the previous month.

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