Inbaeng Faces Emergency to Meet Mid-Interest Rate Target... "Should Be Excluded from Total Volume Regulation"

Total Volume Regulation and Loan Suspension Pose Challenges
Meeting Year-End Targets Unlikely

[Asia Economy Reporter Sung Kiho] Internet-only banks are facing an emergency in meeting the proportion targets for mid-interest rate loans. KakaoBank and K Bank are far from reaching the year-end targets promised to financial authorities, while Toss Bank has already stopped loan operations. Industry insiders point out that since achieving the targets is practically difficult, incentives such as excluding mid- and low-credit loans from the total loan volume regulations should be considered.

According to the financial sector on the 6th, KakaoBank recently announced through a conference call that the proportion of mid-interest rate loans in the third quarter was 13.4%. This is a significant increase compared to 10.0% in the first quarter and 10.6% in the second quarter of this year. However, it is far from the year-end target of 20.8%. K Bank, which has a year-end target of 21.5%, is also struggling. K Bank's proportion actually dropped from 18.2% in the first quarter to 15.5% in the second quarter.

The third internet-only bank, Toss Bank, has completely closed its loan window. This is because it exhausted the total loan volume limit of 500 billion KRW allocated by financial authorities within just ten days of its launch. Toss Bank's proportion of mid-interest rate loans was 28.2%, higher than other banks. However, with loan operations suspended, achieving this year's target of 34.9% has become impossible. During its operating days, the proportion of mid- and low-credit borrowers even reached as high as 33.3%.

Accordingly, these banks have entered an emergency mode to expand mid-interest rate loans during the remaining less than two months of the year. KakaoBank has practically stopped loans to high-credit borrowers, excluding jeonse and monthly rent loans. K Bank plans to suspend new increase applications for overdraft accounts targeting high-credit borrowers from the 6th of this month until the end of the year. Along with this, they are actively conducting promotions to attract mid- and low-credit borrowers.

Internet-only banks are focusing on mid- and low-credit loans as required by authorities but seem to be struggling because they cannot secure high-credit borrowers, who are more profitable. There are also criticisms about whether it is appropriate to include mid-interest rate loans in the total household loan volume regulations. Since one of the conditions for internet bank licensing is the expansion of mid-interest rate loans and the government is actively demanding expansion, including them in the total volume regulations makes growth in the loan market itself difficult.

An internet bank official said, "Internet banks need to be profitable to expand mid- and low-credit loans," and added, "We need to consider excluding mid- and low-credit loans and refinancing loans (loan switching) from the total loan volume regulations."

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