Hong Nam-ki: "From January Next Year, Individual DSR Regulation Applies if Total Loans Exceed 200 Million Won" (Update)

20% Fuel Tax Cut Until Late April
Resumption of 9 Consumer Coupons Including Dining Out

Hong "Full Effort for Livelihood Recovery and Economic Rebound"

Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki presiding over the 47th Emergency Economic Central Countermeasures Headquarters meeting held at the Government Seoul Office on the 26th. (Photo by Yonhap News)

[Sejong=Asia Economy Reporter Moon Chaeseok] Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki announced on the 26th, "The second phase of the borrower-level Debt Service Ratio (DSR) regulation will be implemented six months earlier, starting from January next year."

Fuel tax will be reduced by 20% until the end of April next year, and the Liquefied Natural Gas (LNG) allocation tariff will be set at 0%. Additionally, to revitalize domestic consumption, offline consumption coupon programs will be fully resumed, and consumer discount events will be held.

Deputy Prime Minister Hong presided over the 47th Emergency Economic Central Countermeasures Headquarters meeting at the Government Seoul Office and announced these measures.

Borrower-level DSR Phase 2 Regulation from January Next Year

[Image source=Yonhap News]

The government decided to introduce the borrower-level DSR regulation earlier than planned, which had been a matter of intense public interest. This decision was made because the rapid increase in household debt has worsened financial imbalance between high-income and low-income groups, posing a critical risk to the Korean economy.

The borrower-level DSR regulation sets loan limits based on an individual's ability to repay debt. Under the 40% DSR regulation, only up to 40% of annual income can be used to repay principal and interest.

Initially, the Financial Services Commission applied the 'Phase 1 borrower-level DSR' from July to those who took out mortgage loans secured by houses worth over 600 million KRW in all regulated areas or credit loans exceeding 100 million KRW. The plan was to expand this regulation to borrowers with total loans exceeding 200 million KRW ('Phase 2') starting from July next year, but this has been moved up to January next year, six months earlier.

Deputy Prime Minister Hong said, "We will implement the borrower-level DSR Phase 2 regulation from January next year to manage the household debt growth rate at a lower 4-5% level than this year and to establish lending practices based on individuals' repayment capacity."

However, Jeonse loans (key money deposit loans) will be excluded from the tightened regulations. Hong stated, "We will continue efforts to protect actual demand borrowers. Jeonse loans will be recognized as an exception to the total volume regulation this year and will remain excluded from DSR application even after the DSR regulation is strengthened next year."

20% Fuel Tax Reduction until End of April Next Year

The scene of a gas station in downtown Seoul on the 21st. Photo by Moon Honam munonam@

He also revealed the specific scale and period of the fuel tax reduction. Initially, a 15% reduction until March or April was expected, but after discussions with political circles, it was finalized as a 20% reduction until April.

Deputy Prime Minister Hong said, "To ease the winter fuel cost burden for citizens, companies, and workers, the fuel tax will be reduced by 20% for about six months until the end of April next year, and the LNG allocation tariff will be set at 0%."

He added, "This will lower the price per liter by 164 KRW for gasoline, 116 KRW for diesel, and 40 KRW for liquefied petroleum gas (LPG). This is expected to save about 2.5 trillion KRW and result in a monthly inflation reduction effect of approximately 0.33 percentage points."

He also mentioned, "The capacity secured through the LNG allocation tariff reduction will be used to freeze gas prices from next month through December and to reduce gas prices for power generation and industrial use."

Resumption of 9 Consumption Coupons for Dining Out, Travel, etc. from November

[Image source=Yonhap News]

Along with the fuel tax reduction, the government introduced the use of consumption coupons. The strategy is to maximize face-to-face consumption during the phased daily recovery (With Corona) policy starting next month, focusing all efforts on restoring livelihoods and economic rebound.

To this end, from early next month, offline use of nine consumption coupons covering dining out, accommodation, tourism, sports, movies, and more will be fully permitted. Existing non-face-to-face consumption support policies (such as dining coupons and a policy that refunds 10,000 KRW for four orders over 20,000 KRW via delivery apps) will also continue in parallel.

Deputy Prime Minister Hong explained, "From a quarantine-friendly perspective, we will also continue to utilize existing non-face-to-face methods. During the Korea Sale Festa period (from the 1st to the 15th of next month), we will focus on supporting the economy by enhancing private consumption power through various consumer discount events."