To Maintain Matong Limit, 'Blind Loans'... "Use 50% to Keep It"

Commercial Banks Reduce Credit Line Limits
If Usage Below Certain Ratio
Limit Reduced Upon Extension Request

[Asia Economy Reporter Park Sun-mi]Choi Seung-mi (41, pseudonym), who holds a KB Kookmin Bank overdraft account (Ma-tong), received a notice ahead of the loan maturity date at the end of this month stating that "if the Ma-tong is opened but not used, the limit will be reduced by 20% upon extension." However, if the loan amount exceeds 50% of the limit, the extension can be made without reducing the limit. Although Ms. Choi did not need money immediately, she applied for a loan to pay interest and maintain the limit in preparation for urgent funds in the future.

Due to pressure from financial authorities to manage household loans, commercial banks are reducing the limits of overdraft accounts with low utilization rates, leading to a surge in cases where unnecessary loans are taken out to maintain limits. Because of the clause requiring a certain usage rate of the Ma-tong, and amid an atmosphere of tightening loans across the board, it is expected that the number of consumers who newly opened accounts before the regulations with the mindset of "let's open it first" and take out loans to maintain limits will increase in the future.

According to the banking sector on the 24th, among the four major banks?Kookmin, Shinhan, Hana, and Woori?Kookmin and Hana Bank specify conditions for maintaining limits when extending the Ma-tong period. Kookmin Bank’s Ma-tong special clause states that if the average utilization rate of the loan limit for the three months prior to the Ma-tong maturity date is 10% or less, the loan limit agreement amount will be reduced by 20% before extending the period. However, if the loan balance as of the extension date exceeds 50% of the agreement amount, the extension can be made without reduction.

Hana Bank also notifies customers using the Hana OneQ Ma-tong, known as the "cup noodle loan," that during the loan extension review, the limit may be reduced by up to 50% depending on usage performance, or the entire limit may be reduced if the limit is unused during the loan period.

In fact, customers who have not used the full limit by the Ma-tong maturity date see their loan extension limit cut in half compared to the limit they had a year ago when checking the extension limit. A customer using Hana OneQ said, "There is a risk of having to immediately repay the loan amount reduced by the lowered limit," adding, "As a temporary measure, I have to take out a loan up to the full Ma-tong limit and repay it a few days later to maintain the existing limit upon extension."

Other banks do not explicitly state in their loan terms and review criteria how much of the Ma-tong limit must be utilized to avoid limit reduction penalties upon extension. However, as pressure from financial authorities to manage household loans increases, branches are informing customers with low utilization rates during Ma-tong extension reviews that there may be penalties such as limit reductions, or encouraging limit utilization.

"Disadvantages on Extension if Loan Limit Not Utilized"

A customer said, "There is strong demand to open Ma-tong accounts in preparation for sudden financial needs, but when they are informed that the limit will be reduced if the utilization rate is low at extension, customers have no choice but to temporarily take out unnecessary loans to increase the limit," adding, "The guidance that there will be disadvantages if the loan limit is not utilized feels like an unfair loan inducement."

Recently, amid the enthusiasm for stock and real estate investment and the strengthening of household loan management by financial authorities, consumers have come to perceive Ma-tong as an account that should be opened with the maximum limit possible when available. The number of new Ma-tong accounts opened daily at the five major banks currently exceeds 2,000. In particular, on the 10th, the subscription deadline for SK Bioscience’s public offering, the number of new Ma-tong accounts opened at the five major banks surpassed 2,500, about 10% higher than usual.

A bank official explained, "While there is a movement to reduce Ma-tong limits from the perspective of strengthening household loan management, from the bank’s point of view, they have to set aside reserves for the amount the customer extends the Ma-tong limit, which incurs costs," adding, "We have no choice but to encourage customers who open Ma-tong limits but do not utilize them."

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