Up to 150 Million Won... Banks Gradually Restoring 'Credit Line Limits'

Loan Limits Raised as Demand for Personal Loans Declines
Starting with Hana Last Month, Competing Banks May Follow

Authorities Tighten Loan Regulations This Year
Even with Increased Credit Line and Preferential Rates,
Overall Debt Surge Expected to Be Curbed

[Asia Economy Reporter Sim Nayoung] Commercial banks are restoring the limits on overdraft accounts to their original levels. Since last year, as financial authorities have tightened household loan regulations, reducing demand for unsecured loans, banks have flexibly adjusted loan limits. Despite these measures, the financial sector believes that strengthened loan regulations this year will act as a barrier, limiting the overall increase in loan amounts.

The first bank to restore the overdraft account limit was Hana Bank. From 6 p.m. on the 25th of last month, Hana Bank reverted the 'Hana One Q Unsecured Loan' overdraft limit from the previous 50 million KRW to a maximum of 150 million KRW (within annual income range). Until now, even those with an annual income exceeding 100 million KRW could only borrow up to 50 million KRW via overdraft, but now it is possible up to 100 million KRW (100% of annual income). If the annual income is 200 million KRW, one can borrow up to 150 million KRW through an overdraft account.

Following Hana Bank, other commercial banks are likely to adjust their limits as well. Since September last year, following financial authorities' recommendation to reduce unsecured loans, the overdraft limits at the four major banks (Kookmin, Shinhan, Woori, Hana) were reduced to 50 million KRW. As demand for unsecured loans sharply declined this year, banks no longer need to forcibly restrict loan limits.

This year, authorities set the household loan growth target at 4-5% (year-on-year), strengthening it from last year's 5-6%, signaling their intention to curb household debt growth. Nevertheless, banks have eased limits because they expect to manage total debt amounts under the stricter loan regulations that intensified from January. The DSR (Debt Service Ratio) regulation, which limits borrowers' principal and interest repayments to 40% of annual income, has applied from this month to total loans exceeding 200 million KRW. From July, the regulation will expand to loans exceeding 100 million KRW. Unsecured loan limits are also restricted within annual income.

The banking sector is also gradually restoring preferential interest rates on mortgage loans, which were reduced due to last year's total loan volume regulations. KB Kookmin Bank decided on the 26th of last month to apply a 0.3 percentage point preferential rate to mixed-type mortgage loans. This follows the restoration of preferential rates up to 0.30% on variable-rate mortgage loans from the 3rd of last month. Woori Bank has also restored preferential rates on unsecured and mortgage loan products by up to 0.60 percentage points since last month.

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