Mid-to-Low Credit Borrowers See Increase in Mid-Interest Loans and Decrease in Rates... 32 Trillion Won to Be Distributed to 2 Million People This Year

Plan to Supply 35 Trillion to 2.2 Million People by 2022

New Credit Score Requirement Established for Sa-it-dol Loans... Over 70% of Sa-it-dol Loans to be Supplied to the Bottom 30%
Interest Rate Caps by Sector Lowered by 3.5%P... 'Regulatory Incentives' Provided
Banks to Prepare and Disclose Annual Mid-Interest Loan Supply Plans... Quarterly Supply Performance Comparisons Publicly Announced

[Asia Economy Reporter Lee Kwang-ho] Financial authorities are increasing mid-interest loans for the middle- and low-credit groups and lowering loan interest rates. The plan is to supply about 32 trillion KRW to approximately 2 million people this year, and about 35 trillion KRW to around 2.2 million people by 2022.

On the 25th, the Financial Services Commission announced the 'Mid-Interest Loan System Improvement Plan' as the third follow-up measure following the reduction of the statutory maximum interest rate (from 24% to 20%).

A financial authority official explained, "This plan focuses on expanding mid-interest loans to the middle- and low-credit groups, encouraging lower loan interest rates through the use of digital technology and market competition, and absorbing some low-credit borrowers who might be excluded from the loan market due to the statutory maximum interest rate reduction into mid-interest loans."

First, to expand supply to the middle- and low-credit groups, the financial authorities will introduce a credit score requirement for eligibility to Sa-it-dol loans. Through this, they plan to ensure that over 70% of Sa-it-dol loans are supplied to borrowers in the bottom 30% of credit scores (previously grade 5 or below).

Additionally, private mid-interest loans will be managed by changing the criteria to all unsecured credit loans below the interest rate cap by sector supplied to borrowers in the bottom 50% of credit scores (previously grade 4 or below).

By sector, banks will lower the cap from the existing 10.0% to 6.5%, mutual finance from 12.0% to 8.5%, card companies from 14.5% to 11.0%, capital companies from 17.5% to 14.0%, and savings banks from 19.5% to 16.0%, each reduced by 3.5 percentage points.

Incentives for banks supplying mid-interest loans will also be strengthened. When the household debt growth rate target management resumes, some exceptions will be considered for bank mid-interest loans, and their performance will be reflected in management evaluations. In particular, each bank will autonomously prepare and disclose annual mid-interest loan supply plans, and quarterly supply performance will be publicly compared and announced.

Along with this, internet-only banks will be required to establish their own mid- to low-credit loan expansion mid- to long-term plans, regularly monitor implementation status, and transparently disclose the progress. Furthermore, through the operation of a task force (TF) to advance credit evaluation models for savings banks, specialized credit evaluation models for the middle- and low-credit groups will be developed and distributed. The infrastructure supporting loans for the middle- and low-credit groups using digital technology will also be expanded.

Moreover, to encourage absorption of low-credit borrowers, measures include ▲ lowering the loan brokerage fee cap by 1 percentage point to induce a reduction in loan broker commissions ▲ activating linked mid-interest loans between banks and secondary financial institutions ▲ expanding regulatory incentives for mid-interest loans in secondary financial institutions.

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