Amid the "triple whammy" of high oil prices, a high exchange rate and high inflation, delinquency rates on loans at South Korean banks are rising every year. Notably, the delinquency rate among mid- to low-credit borrowers is about five times higher than the overall rate.
According to "Domestic Bank Lending and Delinquency Status" data submitted by the Financial Supervisory Service to Rep. Kang Min-kuk of the People Power Party on Oct. 28, outstanding loans at domestic banks stood at 2,504.1 trillion won as of the end of March this year, across 24.305 million accounts.
Lending has climbed every year: 1,895.3 trillion won in 2020, 2,051.4 trillion won in 2021, 2,160.2 trillion won in 2022, 2,259.4 trillion won in 2023, 2,384.3 trillion won in 2024, 2,480.7 trillion won last year and 2,504.1 trillion won as of March this year.
The delinquency rate has also risen each year, from 0.21% in 2021 to 0.25% in 2022, 0.38% in 2023, 0.44% in 2024, 0.50% last year and 0.56% as of March this year.
By bank, Citibank had the highest delinquency rate at 8.39%, followed by Jeju Bank at 2.92% and Jeonbuk Bank at 2.83%. Citibank said its figure reflects the phased wind-down of its consumer finance business.
The rise was especially pronounced among mid- to low-credit borrowers. Their delinquency rate, which stood at 1.43% at the end of 2021, climbed to 2.47% last year and jumped to 2.57% at the end of March this year.
"The delinquency rate for mid- to low-credit borrowers is running at nearly five times the overall rate," Rep. Kang said. "If left unaddressed, it could not only erode bank soundness but also spread across the entire financial sector."
He added, "Financial authorities need to supervise delinquency management more rigorously and actively prepare measures to ease repayment burdens, including activating debt-restructuring programs for vulnerable segments such as delinquent mid- to low-credit borrowers."
Meanwhile, the outstanding balance of card loans — an emergency funding source for ordinary households — reached a record high of 42.9942 trillion won last month, up 1.46% from the same month a year earlier. With banks tightening lending standards, mid- to low-credit borrowers are turning to card loans as a virtual last resort.
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