Banks resuming credit loans in 2021

Seen above is a Shinhan Bank sales office in Seoul on Dec. 23 when watchdogs' regulations requiring banks to suspend issuance of credit loans to households were in full swing. Yonhap

By Lee Min-hyung

Domestic commercial banks are moving to resume their non-collateral (credit) loan business at the start of the new year despite growing pressure from financial regulators.

All leading lenders in Korea have been faced with tough regulations from the Financial Supervisory Service (FSS) since last year as the financial authority raised its bar on them to control the rapid rise of household debts by curbing credit loans.

As the end of the year approached, authorities urged lenders to tightly manage the 2020 household loan balance, so major banks had no choice but to follow the order and cut the credit lines of most households.

But with the arrival of 2021, Friday, KB Kookmin Bank, one of the biggest lenders here, plans to restart offering its household credit loans as of Jan. 4. For about two weeks since Dec. 22, the lender has been blocking households from receiving credit loans over 20 million won.

But the lender will keep restricting some loan products. For instance, the bank will continue keeping an upper limit on those in the high-income bracket ― such as doctors and lawyers ― blocking them from receiving credit loans worth more than 200 million won.

Shinhan Bank will also resume offering loan products for households and salaried workers. The bank suspended its online-only loan service for office workers from Dec. 15. But it will be available again as of Jan. 4.

This was made possible as financial authorities urged the banks to control the total household loan balance throughout 2020. But banks are still wary of pressure from the watchdog, so it will take more time for lenders to open up and resume all suspended loan services.

“Guidelines will be made from the watchdog to control the rising household debt this year, but for now, we can resume most of our credit loan business targeting individual customers with the beginning of the new year,” an official from a major lender said.

As of Jan. 1, Kakao Bank ― one of the country's internet-only lenders ― also said it restarted sales of loan services for salaried workers. But households and salaried workers remain anxious over when commercial lenders will suspend the loan services or cut their credit lines again as the FSS made it clear recently that it will keep tight control of the rising household debt.

Starting last October, the FSS and other financial authorities prevented local banks from offering credit loans of more than 2 trillion won each month until the end of 2020.