Banks Propose Win-Win Plan to Refund 1.5 Million Won to Self-Employed with Over 5% Annual Interest

For Self-Employed and Small Business Owners Holding Loans Exceeding 5% Interest Rate

It has been reported that the banking sector is considering providing up to 1.5 million KRW in cash per person to self-employed individuals and small business owners as part of measures to support livelihood finance.

According to Yonhap News on the 10th, the "Banking Sector Livelihood Finance Support Task Force (TF)" held a private meeting on coexistence finance measures on the morning of the 7th and is reviewing such a plan.

Photo by Yonhap News

Based on the latest proposal prepared by the banking sector and discussions within the TF, the cash payment targets are self-employed individuals or small business owners who hold corporate loans with an annual interest rate of 5% or higher as of the end of this year. Borrowers with real estate rental business loans are excluded from the target.

The support method for them will be in the form of cashback, where a portion of the interest they pay next year will be returned to them in cash immediately.

Regarding the interest rate reduction rate, it will be set differentially by dividing the loan interest rates into segments. The higher the loan interest rate, the higher the reduction rate. However, the average reduction rate is planned to be maintained at a minimum of 1.5 percentage points. Considering these reduction rates, the first proposal under discussion is an interest refund amount of "up to 1.5 million KRW annually per 100 million KRW loan" per borrower.

This project involves 18 banks, including major commercial banks, internet-only banks, and regional banks. According to a simulation by the Korea Federation of Banks, the total support amount is about 2 trillion KRW. When the total support amount is distributed according to the size of each bank, the banks plan to provide support autonomously according to their respective policies.

At the request of Financial Supervisory Service Governor Lee Bok-hyun, the banking sector has been steadily presenting coexistence finance measures since the first half of this year. If this cashback proceeds, the amount of coexistence finance support from the banking sector is expected to increase further.