Delinquency rate on bank loans rises for 2nd month in August

The delinquency rate on loans extended by local banks rose for a second consecutive month in August, due largely to a sharp increase in the rate for corporate loans, data showed Friday. The delinquency rate on banks' won-denominated loans came to 0.53 percent as of end-August, up 0.06 percentage point from a month earlier, according to preliminary data from the Financial Supervisory Service (FSS). From a year earlier, the reading marks a 0.10 percentage-point increase. The amount of newly delinquent loans came to 3 trillion won (US$2.19 billion) in August, up 300 billion won from the previous month. The amount of resolved loans, on the other hand, slipped to 1.4 trillion won from 1.5 trillion won over the same period. The delinquency rate on corporate loans stood at 0.62 percent at end-August, up 0.09 percentage point from a month before, while the rate on household loans also gained 0.02 percentage point to 0.40 percent over the cited period. The report comes after the country's central bank slashed it s key rate by 25 basis points to 3.25 percent, marking its first rate cut since August 2021, which the financial regulator earlier said will help reduce interest payments by "hundreds of billions of won" if not trillions of won. "Financial burdens of borrowers are expected to be eased once the impact of the key rate reduction takes effect, but there still remains a need to prepare for possible losses for the time being since the delinquency rate of small and medium-sized businesses, which are more sensitive to economic conditions, continues to remain high," the FSS said in a press release. Source: Yonhap News Agency