'Protection of Actual Buyers' Under Spotlight Ahead of Next Month's DSR Phase 2 Implementation

"We Will Ensure No Loan Suspension for Ordinary Real Demand Borrowers"

[Image source=Yonhap News]

[Asia Economy Reporter Park Sun-mi] Discussions to protect genuine borrowers are active ahead of the implementation of the second phase of the Debt Service Ratio (DSR) regulation next month.

According to financial and political circles on the 11th, during the party-government consultation between the Democratic Party of Korea and the government held the previous day, there was a consensus to proceed with the second phase of the DSR regulation as planned, while ensuring that loan suspensions for low-income genuine borrowers do not occur in the process.

Park Wan-joo, the Policy Committee Chair of the Democratic Party of Korea, stated regarding loan regulations to manage the total volume of household loans, "We will ensure that loan suspensions for low-income genuine borrowers do not happen," adding, "While we will not postpone or cancel the DSR regulation itself, we plan to operate it so that genuine borrowers’ jeonse loans and group loans can continue without interruption as much as possible."

Chair Park emphasized that the total household loan growth rate for next year will be managed at around 4-5%, which is lower than this year’s target of the 6% range, but the actual total loan volume will increase because the base amount is growing. He added, "Next year, we will manage the total loan volume quarterly so that, unlike this year, genuine borrower loans will not be suspended and stable loan supply can be maintained."

The financial authorities proposed managing the total household loan growth rate at around 4-5% next year, while considering excluding loans to low- and medium-credit borrowers and low-income financial products from the total volume management. The financial authorities plan to finalize related details within this month.

Separately, from January next year, the banking sector will allow additional credit loan limits within the DSR regulation scope only for urgent genuine needs such as marriage, funerals, childbirth, and surgery, even though credit loan limits are restricted to within annual income.

According to the ‘Plan to Expand Support for Genuine Borrowers Regarding Credit Loan Limits Within Annual Income’ (hereinafter referred to as the Support Expansion Plan) released by the Korea Federation of Banks the previous day, even if banks limit credit loan limits to within annual income, they can operate a special loan limit exceeding annual income (hereinafter referred to as the Special Limit) when urgent funds are needed for reasons such as marriage, funerals, inheritance tax, childbirth, or surgical hospitalization. The Special Limit is within 0.5 times the annual income and can be up to a maximum of 100 million KRW considering the purpose of the funds.

A Korea Federation of Banks official said, "Support for genuine borrowers will be implemented in January next year after banks complete their system preparations," adding, "Specific application criteria, implementation status, and schedules may vary by bank, so detailed information should be confirmed through the respective banks."

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