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Banks' lending rates drop for 2nd straight month in July

All News 12:00 August 28, 2020

SEOUL, Aug. 28 (Yonhap) -- South Korean banks' lending rates fell for the second straight month in July as rates charged on corporate and household loans declined amid falling market rates, central bank data showed Friday.

The average interest rate charged on new bank loans came to 2.7 percent in July, compared with 2.72 percent the previous month, according to preliminary data from the Bank of Korea (BOK).

It marked the second straight month of declines since July when the lending rates fell by 0.1 percentage point following the central bank's policy rate cut in May.

The BOK cut the policy rate to a record low of 0.5 percent in May after delivering an emergency rate cut of half a percentage point to 0.75 percent in March to cushion the impact of the new coronavirus outbreak.

The central bank kept steady the base rate on Thursday as uncertainties from the flare-up in virus cases heightened.

In July, the average lending rate on fresh corporate loans came to 2.74 percent, down 0.01 percentage point from the previous month.

The average rate on new household lending fell 0.05 percentage point to 2.62 percent last month as rates charged on home-backed loans declined in line with falls in market rates.

The average rate for bank deposits, meanwhile, fell to a record low of 0.82 percent last month from 0.89 percent in June, the BOK said.

South Korean lenders' loan-deposit spread, a gauge of banks' profitability from lending, widened to 1.88 percentage points in July from 1.83 percentage points in June.

In this file photo, taken April 4, 2020, a bank official (R) at Shinhan Bank in Seoul explains a special low-interest rate product for small- and medium-sized companies hit by the new coronavirus pandemic to a visiting customer. (Yonhap)


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