'Household Loan Growth Rate Within 5%'... Credit Loans a 'Needle's Eye'

[Image source=Yonhap News]

[Asia Economy Reporter Oh Hyung-gil] In response to the overheated real estate market and the surge in debt-driven investments, the government has been tightening household loans aggressively since the beginning of the year.

Within the banking sector, there are complaints that the demand for funds inevitably increased due to the COVID-19 pandemic, but the directive to unrealistically lower the household loan growth rate is excessive. There are also growing concerns that the financial lifeline for low-income and low-credit households could be cut off.

According to the financial sector on the 31st, at the request of financial authorities, the five major commercial banks submitted their household loan growth rate management targets for this year at the end of last year.

Some banks, as in previous years, set the target at around 5%, while others set it between 6% and 8%.

Banks that set relatively higher growth rates believed that the 'special situation' of surging fund demand due to the COVID-19 pandemic would continue this year as it did last year.

Last year, the total household loans of the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?increased by 9.73% (59.3977 trillion KRW) compared to 2019.

However, on the 26th, the Financial Supervisory Service reportedly told senior executives (vice president level) in charge of household loans at commercial banks during a meeting on household loan trends, "Banks submitted their annual and monthly household loan growth rate management targets at the end of last year, but if these are considered excessive, we will suggest adjusted figures."

Accordingly, the banking sector expects that the household loan growth rate target for this year will be uniformly lowered to around 5%.

As the authorities recommend lowering the household loan growth rate to nearly half of last year's level, banks are tightening credit loans.

Shinhan Bank lowered the credit loan limit for general salaried workers by 50 million KRW, from 150 million to 200 million KRW to 100 million to 150 million KRW, depending on the product, on the 15th.

Woori Bank also drastically reduced the limit on its overdraft loan products from the previous 80 million to 100 million KRW to 50 million KRW on the 29th, and internet-only bank KakaoBank cut the limit on overdraft loans and credit loan products for high-credit salaried workers from 150 million KRW to 100 million KRW on the 22nd, a reduction of 50 million KRW.

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