Increasing Mid-to-Low Credit Loans by Internet Banks... Household Loans Also Rising for Four Consecutive Months

Total Household Loan Balance of 37.2718 Trillion KRW as of Late April
Borrowers from Secondary Financial Sector Moving to Internet Banks

[Asia Economy Reporter Sim Nayoung] As internet banks increase loans to middle- and low-credit borrowers, the scale of household loans continues to grow.

According to the financial sector on the 8th, the total balance of household loans from the three internet banks (KakaoBank, K Bank, and Toss Bank) has increased for the fourth consecutive month. As of the end of April, the total household loan balance was 37.2718 trillion KRW, up 1.1279 trillion KRW from the end of March (36.1439 trillion KRW).

The household loan balance of internet banks has increased for four consecutive months this year: +1.1916 trillion KRW in January, +658 billion KRW in February, and +811.4 billion KRW in March.

The financial authorities had ordered internet banks in May last year to expand the proportion of loans to middle- and low-credit borrowers. Although the original purpose of establishing internet banks was to expand loan supply to the middle- and low-credit groups, they were criticized for conservative lending focused on high-credit borrowers.

KakaoBank and K Bank raised this proportion this year, recently increasing the share of loans to middle- and low-credit borrowers to the 20% range among all new loans. By the end of last year, the proportions were only 17.0% and 16.6%, respectively, falling short of the target. Toss Bank also raised this proportion from 23.9% at the end of last year to the 33% range recently.

By actively conducting promotions such as 'first month interest support,' a large number of refinancing demands from middle- and low-credit borrowers in the secondary financial sector, such as savings banks, have also flowed in. An internet bank official explained, "We provide unsecured loans to middle- and low-credit customers at an average interest rate of 5 to 10%. There is a high demand for refinancing from middle- and low-credit customers who previously took loans at interest rates above 10% in the secondary financial sector."