Bank Delinquency Rate Drops 0.08%p, Lowest in 5 Years

Dropped to 0.43% in February from 0.51%
"Preparing for Possible Increase in Delinquency Rate Due to High Interest Rates, High Inflation, and High Exchange Rates"

As of February, the domestic bank loan delinquency rate, which was at its highest level in five years, has dropped significantly.

According to the "Status of Domestic Bank Won-denominated Loan Delinquency Rate as of the End of March 2024" released by the Financial Supervisory Service on the 15th, the delinquency rate fell by 0.08 percentage points from 0.51% at the end of the previous month to 0.43%. However, compared to the same period last year (0.33%), it increased by 0.1 percentage points.

This is because new delinquencies decreased while the volume of delinquent loan resolutions increased. The amount of new delinquencies in March was 2.4 trillion KRW, down 500 billion KRW from 2.9 trillion KRW in the previous month. The volume of delinquent loan resolutions was 4.2 trillion KRW, an increase of 2.8 trillion KRW compared to 1.3 trillion KRW in the previous month. Additionally, the new delinquency rate also fell by 0.02 percentage points from 0.13% in the previous month to 0.11%.

Looking at the status by sector, delinquency rates decreased across all sectors, including corporate loans and household loans. The corporate loan delinquency rate dropped by 0.11 percentage points from 0.59% in the previous month to 0.48%. The delinquency rates for large corporations, small and medium-sized enterprises (SMEs), and small corporations were 0.11%, 0.58%, and 0.61%, respectively, down 0.07, 0.12, and 0.15 percentage points compared to the previous month. The delinquency rate for individual business loans also decreased by 0.07 percentage points from 0.61% in the previous month to 0.54%.

For household loans, the delinquency rate was 0.37%, down 0.05 percentage points from 0.42% in the previous month. The delinquency rate for mortgage loans decreased by 0.02 percentage points from 0.27% in the previous month.

However, the financial authorities analyzed that it is necessary to prepare for the possibility of rising delinquency rates among vulnerable borrowers due to ongoing high interest rates, high inflation, and high exchange rates amid domestic and international uncertainties.

The Financial Supervisory Service stated, "We will encourage debt restructuring for borrowers at risk of delinquency and strengthen asset soundness management by promoting active resolution (including sale) of delinquent loans by banks. We also plan to continuously guide banks to maintain sufficient loss absorption capacity in preparation for the potential expansion of credit losses due to domestic and international uncertainties."