Small credit loans of 3 million won or less at South Korea's largest savings banks rose just 0.4% this year, according to industry data. The stall reflects tighter lending standards under the government's household debt caps, which have pushed savings banks to screen borrowers more selectively.
Combined balances of small credit loans of 3 million won or less at four major savings banks — SBI, OK, Korea Investment and Welcome — stood at 650.3 billion won as of the end of June, financial industry sources said on the 29th. That was up 2.8 billion won, or 0.4%, from 647.5 billion won at the end of last year.
The entire increase came from a single lender. SBI's balance rose 19.7 billion won, or 9.9%, to 218.5 billion won from 198.8 billion won. By contrast, OK fell 11 billion won, or 2.8%, Welcome dropped 4.8 billion won, or 18.1%, and Korea Investment declined 1.1 billion won, or 3.3%.
The flat growth stems from household debt caps and asset quality pressures acting at the same time. Small credit loans are used mainly by low-credit borrowers who need cash quickly. For savings banks, the products carry both default risk and the burden of loan-loss provisions. Lending caps also leave little room to expand new originations aggressively.
"When you cannot expand lending much, loans inevitably go to borrowers with relatively higher credit scores even among low-credit customers," an official at a savings bank said. "Small credit loans are high-risk products with heavy provisioning burdens, so it is not easy to increase how many we handle."
Small credit loans at savings banks had been growing through last year. Balances at 79 savings banks totaled 1.3975 trillion won at the end of last year, up about 20% from a year earlier. Tighter lending rules at commercial banks at the time raised the bar for credit loans there, pushing vulnerable borrowers in need of quick cash toward small credit loans at savings banks. This year, however, even that growth has eased at the largest savings banks.
Supply of small credit loans expanded at some savings banks owned by financial holding companies and banks. Combined balances at seven such lenders — NH, KB, Shinhan, Hana, Woori Financial, BNK and IBK — rose 51.9 billion won, or 19.9%, to 312.9 billion won at the end of June from 261 billion won at the end of last year. Balances grew at five of them — NH, KB, Shinhan, Hana and IBK — in contrast to the largest savings banks.
