Banking Sector's Voluntary Maturity Extension Plan for Small Business Owners Revealed

[Asia Economy Reporter Song Hwajeong] As the maturity extension and repayment deferral for small business owners are set to end at the end of September, banks will proceed with voluntary maturity extensions going forward.

According to the Financial Supervisory Service on the 31st, banks will decide whether to provide support based on their own criteria among eligible small business owners. Eligible small business owners are borrowers who applied for maturity extension and repayment deferral but were excluded from the New Start Fund support. The banks' own criteria consider internal credit ratings, average deposit balances, days past due, recent loan records, secondary financial institution loan information, and card performance.

Based on the seven major banks including KEB Hana, Shinhan, Kookmin, Woori, NongHyup, and Busan Bank, over 95% of loans subject to COVID-19 maturity extension and repayment deferral meet the banks' internal maturity extension criteria. Among three banks applying internal credit rating standards, 95.2% qualify, and banks conducting case-by-case discretionary reviews also estimate over 95% eligibility.

As of the end of June this year, the total outstanding balance of maturity extension and repayment deferral loans at the seven major banks was KRW 62.5 trillion (76.3% of small business owner maturity extension and repayment deferral loans in the banking sector), with maturity extension loans accounting for 89.7%. Loans overdue by more than three months amounted to KRW 205.4 billion, representing 0.3% of the total.

The financial authorities plan to reflect recovery potential in credit evaluations for cases where financial conditions have deteriorated but normal business operations continue and sales recovery is likely. They will also apply preferential interest rates for maturity extensions and minimize interest rate increases due to credit rating downgrades.

Furthermore, concerns are rising that the burden on vulnerable groups will intensify due to the end of COVID-19 financial support and the full-scale interest rate hikes, so support will be strengthened.

Through raising and standardizing the operational criteria of support programs, which vary by bank, the scope of eligible borrowers will be expanded and blind spots in support will be addressed. Management consulting for small business owners and self-employed individuals will be enhanced along with financial difficulty counseling. To support vulnerable small business owners and self-employed individuals, banks will expand and provide management consulting currently conducted for startups and business sector transitions. Additionally, in preparation for the implementation of financial sector livelihood stabilization programs, the Financial Supervisory Service’s 'Financial Difficulty Counseling Center' will be actively utilized to assist in resolving financial difficulties.

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