Commercial Banks Cutting 'Matong'... "From the Perspective of Managing Total Household Loans"

[Asia Economy Reporter Seong Gi-ho] The four major domestic commercial banks?KB Kookmin, Shinhan, Woori, and Hana Bank?have all simultaneously implemented policies to adjust the limits on overdraft accounts based on usage rates since last year. This move is a response to the financial authorities' ongoing efforts to strengthen household loan management, and it is expected that this trend will continue for the time being.

According to the banking sector on the 8th, Shinhan Bank has decided that starting yesterday, when extending or renewing overdraft accounts with limits exceeding 30 million KRW, if the usage rate of the limit during the contract period or three months before maturity is below 10%, the limit will be reduced by up to 20%.

Earlier, Woori Bank had, since last month, reduced the limits by 10% for customers using less than 10% of their overdraft accounts exceeding 20 million KRW at the time of extension or renewal, and by 20% for those using less than 5%. Hana Bank also allows for a reduction of up to 50% in the overdraft account limit for its non-face-to-face credit loan product, ‘Hana One Q Credit Loan,’ if the usage performance is low.

KB Kookmin Bank has been reducing the limit by 20% for overdraft accounts exceeding 20 million KRW since July last year if the average loan limit utilization rate three months before maturity is 10% or less. However, NH Nonghyup Bank has not yet implemented related policies.

The banking sector interprets this adjustment of overdraft account limits as part of strengthening household loan management. Currently, banks are responding to financial authorities' recommendations by reducing credit loan limits or lowering preferential interest rates on mortgage and jeonse loans. The government views high-value credit loans as funds for ‘debt investment’ and ‘all-in’ strategies in the real estate market and has been ordering stricter credit loan management since the end of last year.

As part of this, the four major commercial banks (Shinhan, KB Kookmin, Woori, and Hana) are actively implementing policies to reduce limits when extending overdraft accounts. Because overdraft accounts record the contracted amount as the loan balance, managing them becomes more burdensome under total volume regulations.

An official from the banking sector said, "The adjustment of overdraft account limits is part of managing the total volume of household loans," adding, "Also, unused funds can be supplied to actual users, so this trend is expected to continue for the time being."