Banks Tighten Loans... Internet Banks Also Join in Reducing Limits

[Asia Economy Reporter Kiho Sung] Banks are tightening the reins on credit loans by consecutively reducing credit loan limits or suspending new applications for overdraft accounts. This is interpreted as a response to warnings from financial authorities following an increase in bank credit loans due to the 'debt investment (debt-financed stock investment)' craze since the beginning of the year.

According to the financial sector on the 23rd, KakaoBank is reducing the maximum limit of credit loan products for high-credit salaried workers from the existing 150 million KRW to 100 million KRW. The applicable products are salaried worker overdraft accounts and salaried worker credit loans, and the new limits will apply to new contracts from 6 a.m. on the 22nd.

KakaoBank explained that this is to expand mid-interest rate loans. Regarding this reduction, KakaoBank stated, "To expand mid-interest rate loans and loans for middle to low credit borrowers, which are the core strategic goals of the credit business division this year, we have decided to reduce the maximum limit of high-credit loan products."

However, the industry believes that this reflects the government's policy to suppress credit loans. Commercial banks have also started reducing their limits.

Suhyup Bank also suspended new overdraft loan applications under the 'Sh The Dream Credit Loan' from the 22nd. The bank explained, "New applications have been suspended because the operating limit for overdraft loans has been exhausted." The resumption date has not been set. The Sh The Dream Credit Loan targets salaried workers with an annual income of over 30 million KRW and at least six months of employment, and the overdraft loan limit is 50 million KRW.

Shinhan Bank lowered the preferential interest rates for Shinhan Jeonse Loans guaranteed by Seoul Guarantee Insurance by 0.1 percentage points for each category from the 19th, and raised the interest rates by 0.1 percentage points for Shinhan Jeonse Loans guaranteed by Korea Housing Finance Corporation and Housing and Urban Guarantee Corporation. Earlier, on the 15th, Shinhan Bank had also lowered the maximum limit per case by 50 million KRW for four types of salaried worker credit loans.

The financial sector views the reason banks are successively regulating credit loans as a result of government policy. On the 11th, the Financial Supervisory Service held a video conference with loan officers from major banks to check each bank's loan targets. The Financial Services Commission also ordered management of credit loans, which have shown signs of a surge again since the new year.

This is because the scale of bank credit loans has been rapidly increasing since the beginning of the year. As of the 13th, the outstanding balance of personal credit loans at the five major commercial banks?Shinhan, KB Kookmin, Hana, Woori, and NongHyup?was 135.3695 trillion KRW. This is an increase of 1.7213 trillion KRW compared to the end of December last year (133.6482 trillion KRW).

As banks continue to reduce credit loans one after another, it is expected that other banks that have not yet adjusted their limits will likely join in. If loan demand concentrates on banks with generous limits, adjustments by the others will be inevitable.