Implementation of 'Safe Fixed-Rate Special Loan' to Ease Interest Burden for Small and Medium Enterprises

Total Supply Scale of 6 Trillion Won

Applications Accepted from the 30th via Korea Development Bank and Industrial Bank of Korea

KDB Industrial Bank stock photo / Photo by Moon Ho-nam munonam@

[Asia Economy Reporter Shim Nayoung] The 'Safe Fixed-Rate Special Loan,' designed to help small and medium-sized enterprises (SMEs) reduce interest rate burdens through fixed-rate loans during periods of rising interest rates, will begin on the 30th. Loan applications can be made at nationwide branches of the Korea Development Bank and Industrial Bank of Korea.

On the 27th, the Financial Services Commission announced, "All SMEs can refinance their existing loans into the Safe Fixed-Rate Special Loan or apply for the Safe Fixed-Rate Special Loan while maintaining their existing loans." This applies even to existing borrowers of the Korea Development Bank and Industrial Bank of Korea.

The total supply scale is 6 trillion KRW, with the Korea Development Bank responsible for 2 trillion KRW and the Industrial Bank of Korea for 4 trillion KRW. If the supply limit is exhausted, additional supply will be considered based on interest rate trends and market conditions.

The preferential interest rate level involves a reduction of up to 1.0 percentage point (p) to bring the fixed-rate loan interest rate down to the level of the variable-rate loan interest rate. This is an option-type loan product that allows switching between variable and fixed interest rates every six months during the loan period, with no limit on the number of switches.

SMEs can choose the interest rate type?fixed or variable?based on the advantages or disadvantages arising from future interest rate fluctuations. When an interest rate decline period arrives, they can switch to a variable rate.

The loan maturity is up to 3 years for working capital and up to 5 years for facility funds. For the Korea Development Bank, loans of up to 10 billion KRW (3 billion KRW for working capital, 7 billion KRW for facility funds) are available, and for the Industrial Bank of Korea, loans of up to 5 billion KRW (1 billion KRW for working capital, 4 billion KRW for facility funds) can be used.

A Financial Services Commission official stated, "The Safe Fixed-Rate Loan is not promoted in advance by phone calls, text messages, or SNS from the government, Korea Development Bank, or Industrial Bank of Korea," adding, "Recently, voice phishing messages impersonating government, public institutions, and financial institutions have been randomly occurring, inducing loan brokerage consultations or urging recipients to click on URLs, so special caution is required."