(LEAD) Banks' household loans down for 4th month in March on curbs, high rates

All News 14:11 April 13, 2022

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SEOUL, April 13 (Yonhap) -- Banks' loans to households in South Korea declined for the fourth straight month in March amid high interest rates and the government's curbs on lending, central bank data showed Wednesday.

Outstanding bank loans to households stood at 1,059 trillion won (US$861.3 billion) as of end-March, down 1 trillion won from a month earlier, according to the data from the Bank of Korea (BOK).

This marked the fourth straight on-month decline in bank's lending to households. The March decline is steeper than a 200 billion-won fall tallied in the previous month.

The decline is partly caused by the government's continued restrictions on lending, rising borrowing costs due to higher interest rates and less demand for home purchases, the BOK said.

Home-backed loans grew 2.1 trillion won on-month to 784.8 trillion won, but other types of loans, mostly unsecured lending, shrank 3.1 trillion won to 273 trillion won, the data showed.

Taking into account loans extended by banks and other non-bank financial firms, outstanding household loans shrank 3.6 trillion won in March from a month earlier, according to separate data provided by the Financial Services Commission.

The government has maintained a tight grip on banks' lending as part of efforts to rein in household debt that has emerged as a potential risk for the economy.

The BOK's series of rate hikes since August last year to tame inflation have also pushed up banks' lending rates and made money more expensive for borrowers.

BOK Gov. nominee Rhee Chang-yong, who is awaiting a parliamentary confirmation, earlier voiced concerns over the household debt issue, hinting that the central bank could increase borrowing costs further to prevent the matter from getting worse.

Expectations, however, are growing that the incoming government of President-elect Yoon Suk-yeol will ease restrictions on borrowing when it takes office next month, a possible turnaround on lending and real estate policy from the outgoing administration.

An earlier BOK survey showed that banks are expected to ease their lending policy for households and companies in the second quarter of this year.

Banks' loans to businesses, meanwhile, grew 8.6 trillion won to stand at 1,093.9 trillion won at the end of March, the data showed.

The increase is attributed to banks' continued efforts to support pandemic-hit companies and increased demand for funds needed for business operations.