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S. Korea’s household debt picks up despite strict debt regulations

Collected: 2017.03.10

Distributed: 2017.03.13

Source: Go Direct

Growth in South Korea’s household loans picked up due to surge in non-banking loans as tighter bank loan guidelines sent consumers and self-employed merchants to the non-banking sector for lending amid stagnant income and business.

According to data released by Bank of Korea (BOK) on Thursday, the balance of household loans from the non-banking sector reached 294 trillion won ($254.1 billion) in January, up 2.94 trillion won from the previous month.

Borrowing at savings banks hit an all-time high of 19.26 trillion won, increasing by the biggest-ever volume of 977.5 billion won from a month earlier. Other alternative financial services including credit association and mutual finance have been active in lending as cash-strapped people with low credit ratings turned to the non-banking sector. The Korean government had introduced a slew of tighter regulations on loans from banks in a bid to curb the nation’s snowballing household debts last year.

Despite the government’s effort to check household debts, the balance of household loans from banks also rose 2.9 trillion won from the previous month to 710.9 trillion won in February. Over the same period, mortgage loans grew by 2.1 trillion won and other loans including line of credit loans and credit card loans went up 800 billion won.

By Boo Jang-won

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