National Policy Banks Increase Funding to Support COVID-19 Relief Efforts

[Image source=Yonhap News]

[Asia Economy Reporter Park Sun-mi] National policy banks have expanded liquidity in their COVID-19 financial programs and launched additional support measures. This is a follow-up action in response to Financial Services Commission Chairman Ko Seung-beom's emphasis that sufficient policy funds must be provided to vulnerable sectors such as small and medium-sized enterprises (SMEs) and small business owners until the complete overcoming of COVID-19.

According to the financial sector on the 29th, KDB Industrial Bank is preparing to operate Season 2 of the COVID-19 damage support program "Cheer Up Korea Special Operating Fund," which has exceeded a utilization rate of 90% as of the end of September. Since 100% utilization is expected soon, the bank plans to start Season 2 within the year with a scale of 1 trillion KRW.

The support targets are companies affected by COVID-19 or those that have received COVID-19 financial support, with a support limit of up to 60 billion KRW for SMEs and up to 120 billion KRW for mid-sized companies. The loan interest rate is calculated by adding the base rate and the additional rate, with a maximum interest rate discount (reduction) benefit of 0.90 percentage points.

The "Cheer Up Korea Special Operating Fund" was launched in March last year with a scale of 5 trillion KRW as part of the government's "COVID-19 related financial market stabilization measures," aimed at expanding loans to SMEs and mid-sized companies. At that time, the support limit was up to 5 billion KRW for SMEs and up to 10 billion KRW for mid-sized companies, with an interest rate discount of 0.6 percentage points. Since September last year, the support limits have been expanded to 60 billion KRW and 120 billion KRW respectively, and the preferential interest rate has been increased to 0.9 percentage points.

Lee Dong-geol, Chairman of KDB Industrial Bank, said, "KDB will actively participate in the extension of maturity and repayment deferral, and through sufficient liquidity support, will actively join the government's 'orderly normalization' policy."

IBK Industrial Bank also plans to provide additional support with the "Haenaeri Loan," which offers up to a 1% additional interest rate reduction for small business owners and self-employed individuals with fewer than 10 regular employees who are experiencing financial difficulties due to COVID-19. The Haenaeri Loan has been operated with a scale of 2.5 trillion KRW since January last year. As of the end of August, 2.5252 trillion KRW has been supplied, and the limit is nearly reached.

IBK has decided to increase the Haenaeri Loan scale by 1 trillion KRW to expand support to 3.5 trillion KRW to assist small business owners and small enterprises struggling due to COVID-19.

Regarding this, Yoon Jong-won, President of IBK, said, "We are actively participating in overcoming the COVID-19 crisis by extending loan maturities worth 39.6 trillion KRW and deferring interest repayments of 2.1 trillion KRW to reduce the debt burden of SMEs and small business owners," adding, "Overcoming the COVID-19 crisis will be our top priority."

Meanwhile, the Export-Import Bank of Korea plans to continue operating the new liquidity supply program (including guarantees) set at 4.5 trillion KRW at the beginning of the year, as there is still room within the limit, and will consider additional expansion after the limit is reached. Separately, by the end of the first quarter of next year, it will proceed with maturity extensions worth 5.1 trillion KRW for SMEs and mid-sized companies and defer the collection of interest guarantee fees for SMEs.