Shinhan Bank Also Slows Down... It Becomes Harder for Office Workers to Open 'Matong' Over 50 Million Won

Major Banks Gradually Reduce Limits Since Early Year
Impact of Authorities' Pressure on Household Loan Management

Shinhan Bank Reduces Overdraft Limits for Office Workers and Public Officials from 100 Million KRW to 50 Million KRW

[Asia Economy Reporter Seong Giho] Since the beginning of the year, as banks have tightened credit loans strongly, it has become difficult for office workers to secure overdraft accounts (limit transaction loans or automatic overdraft loans) exceeding 50 million KRW.

According to the financial sector on the 1st, Shinhan Bank will lower the overdraft limit for its 'SOL Convenient' office worker credit loan and public official credit loan products to 50 million KRW each starting from the 3rd.

The previous maximum limit was 100 million KRW, but from now on, overdraft accounts can be used up to a maximum of 50 million KRW, and the remainder must be accessed through general credit loans.

Along with this, Shinhan Bank will also strengthen the Debt Service Ratio (DSR) review criteria for credit loans. Before the 3rd, only cases where the DSR exceeded 50% underwent head office review, but from the 3rd, any case exceeding 40% will be subject to head office review.

A Shinhan Bank official explained this measure by saying, "As household loans have been increasing rapidly recently, we are reducing overdraft limits and strengthening DSR reviews to focus on responding intensively to the funding needs of actual users, such as loans for living stabilization funds."

Earlier, on the 29th of last month, Woori Bank also reduced the limit of its overdraft loan products from the previous 80 million to 100 million KRW to 50 million KRW. Suhyup Bank stopped new overdraft loans for office workers under its 'Sh The Dream Credit Loan' product on the 22nd of last month.

Internet-only banks are also joining the trend of limit reductions. KakaoBank reduced the limit of overdraft loans and high-credit office worker credit loan products from 150 million KRW to 100 million KRW on the 22nd of the same month, cutting 50 million KRW. K Bank also raised the interest rate on overdraft loans for office workers by 0.1 percentage points on the 28th of last month, adjusting the minimum interest rate to an annual 3.0%.

The strong management of credit loans centered on overdraft accounts by banks is pointed out to be related to regulatory pressure on household loan management. Financial authorities are concerned about the rapid increase in household debt due to 'debt investment (debt-financed investment)'.

Accordingly, the target growth rate for household loans in the banking sector this year is expected to be uniformly lowered to around 5%. At the end of last year, the five major commercial banks submitted household loan growth management targets of 5 to 8% for this year. Subsequently, it is known that financial authorities told senior executives (vice president level) in charge of household loans at commercial banks during a recent meeting on household loan trends, "If you think the target growth rate is excessive, please suggest an adjustment."