Authorities Unveil Plans to Expand Mid-Low Credit Borrower Mid-Interest Loans... Internet Banks Also Accelerate Efforts

High Possibility of Adjustment After Confirming Specific Figures

[Asia Economy Reporter Kiho Sung] As financial authorities plan to increase mid- to low-credit tier mid-interest rate loans and lower loan interest rates, related products from internet-only banks are also expected to expand significantly soon.

On the 25th, the Financial Services Commission announced the "Mid-Interest Rate Loan System Improvement Plan" as the third follow-up measure following the reduction of the statutory maximum interest rate (from 24% to 20%). The plan aims to supply approximately 32 trillion won to about 2 million people this year and 35 trillion won to about 2.2 million people by 2022.

Accordingly, the launch of mid-interest rate loan products by internet banks is expected to accelerate. Mid-interest rate loans generally refer to loans targeting mid-credit borrowers, equivalent to the former credit grades 4 to 6. K Bank and Kakao Bank declared at their openings in 2017 that they would actively supply loans to mid-credit borrowers who were underserved by traditional banks.

The financial authorities will require internet banks to establish mid- to low-credit tier loan expansion mid- to long-term plans independently, regularly monitor the implementation status, and transparently disclose the progress. Earlier this month, the Financial Services Commission requested specific mid-interest rate loan expansion plan figures from Kakao Bank and K Bank as part of their total household loan volume.

The Financial Services Commission is known to plan to regularly check the implementation status after receiving the plans to encourage internet-only banks to actively expand mid-interest rate loans. Additionally, Toss Bank, which is undergoing the approval process for the third internet-only bank, has been informed to submit a mid-interest rate loan plan before its official launch.

The reason financial authorities require submission of target figures is closely related to the scheduled statutory maximum interest rate reduction in July (from 24% to 20% annually). Given the reality of the domestic loan market, if borrowers cannot pass the bank's threshold, they are likely to resort to high-interest loans.

Financial authorities view the expansion of mid-interest rate loans by internet-only banks as below expectations. For this reason, Kakao Bank announced earlier this year that it plans to launch a loan product exclusively for mid- to low-credit borrowers soon. Kakao Bank supplied 1.3 trillion won in mid-interest rate loans last year and plans to further expand the supply scale this year.

K Bank also plans to increase the proportion of mid- to low-credit customers with grade 4 or below to 30% by 2023. Additionally, it plans to diversify its product lineup by launching the policy mid-interest rate loan product "Saitdol Loan" within this year.

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