"Top 5 Banks' Loans to Small Businesses and SMEs with Deferred Principal and Interest Near 37 Trillion Won"

Loans to small business owners and small and medium-sized enterprises (SMEs) whose principal and interest payments were deferred for about three years as part of COVID-19 financial support by the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?have been estimated to approach 37 trillion won.

As financial support phases out sequentially from September, it could act as a ticking time bomb for non-performing loans. Each bank is making efforts to identify borrowers who have reached their limits, guide them toward a soft landing, and reduce risks.

According to the 'COVID-19 Financial Support Performance' data from the five major commercial banks as of the 4th of this month, the outstanding balance of loans with extended principal or interest payment deadlines in various forms since support began amounts to 36.62 trillion won, covering 259,594 cases (including overlapping extensions of maturity, principal repayment deferrals, and interest deferrals).

The outstanding balance of loans with extended maturities (including re-contracting) totals 34.81 trillion won, and 1.53 trillion won of 'installment payments' from companies repaying loan principal in installments were also deferred without collection. During the same period, 276.2 billion won in interest was also deferred.

When the COVID-19 pandemic began in early 2020, banks extended the maturity of loan principals and deferred interest payments for SMEs and small business owners in accordance with government policies. The support initially started with a deadline set for September 2020, but as the impact of COVID-19 prolonged, the end date for support was extended five times.

A representative from a commercial bank said, "If there is no decision to extend again, financial support will effectively end starting with borrowers who have deferred repayments from September, and large-scale loan defaults could become a reality, causing a sudden rise in bank delinquency rates in the second half of the year." He added, "Each bank has begun activating emergency systems in preparation for the possibility of a potential financial crisis."