[SME Loan Concerns]③ New Non-Performing Loans Increase by 1 Trillion Won in One Year

New Non-Performing Loans Reach 1.8 Trillion Won in Q1 This Year
Up from 900 Billion Won in Q1 Last Year

Existing Loan Interest Rates Remain Unchanged
Maintained at Similar Levels to Last Year

Small and medium-sized enterprises (SMEs) that originally took out bank loans to cover facility and operating funds are increasingly falling into the quagmire of delinquency. This is evident from the Financial Supervisory Service's announcement on the 'Status of Newly Occurred Non-Performing Loans (NPLs) of Domestic Banks.' NPLs refer to bank loans with a delinquency period of three months or more.

Although interest rates for SMEs have decreased, this only applies to newly acquired loans. The balance-based interest rate for existing loans remained almost unchanged, from 5.31% in November last year to 5.26% in April this year. This rate is still higher than the new SME loan interest rate (5.16%).

Looking at the scale of newly created NPLs, SMEs stand out distinctly. New NPLs for SMEs increased by 900 billion KRW, from 900 billion KRW in the first quarter of last year to 1.8 trillion KRW in the first quarter of this year. During the same period, large corporations saw a decrease in new NPLs, from 300 billion KRW to 100 billion KRW.

The ratio of NPLs by sector shows a similar trend. As of the first quarter of this year, the NPL ratio for SME loans was 0.57%, up 0.05 percentage points compared to the same period last year. In contrast, the NPL ratio for large corporation loans (0.38%) fell by 0.42 percentage points during the same period.

Meanwhile, the loan repayment deferral program for SMEs and self-employed individuals, which has been in place for four years since the spread of COVID-19, will end in September. Loans that have received principal and interest repayment deferrals, which will expire in three months, amount to 6.5 trillion KRW. However, after September, borrowers and financial institutions can agree on repayment plans that include grace periods on existing interest and allow installment repayments over a maximum of 60 months.

In the case of maturity extensions (78.8 trillion KRW), since interest is being steadily paid, this program can continue to be used until September 2025. The total amount of loans with maturity extensions and repayment deferrals decreased from 100.1 trillion KRW at the end of September last year to 85.3 trillion KRW in March this year. A Financial Services Commission official analyzed, "There are cases where the financial capacity of SMEs and small business owners has improved, and many have completed repayments through low-interest refinancing loans."

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