The number of debtors and their credits from local banks are projected to hit record highs this year amid rising household debts, industry data indicated Monday.
Some 10.5 million people took out loans from commercial banks as of the end of June, data showed, for a total amount of 487.7 trillion won (US$442.6 billion). The figure had peaked at 10.45 million people in 2012 and declined to 10.44 million in 2013.
The loan total translates to individual lenders owing 46.41 million won each on average.
Market watchers say that at the current pace, the number of debtors is likely to exceed 11 million before the end of the year as household debts have been rising sharply during the second half on government-led economic recovery policies.
In July, Finance Minister Choi Kyung-hwan ambitiously introduced a set of stimulus measures, including eased lending regulations, such as the loan-to-value (LTV) and debt-to-income
(DTI) ratios.
In line with the government's efforts, the central bank cut key rates twice in the second half, in August and October, and has kept the rate at a record low of 2 percent.
Household credit, extended by the entire financial industry including banks, secondary lenders and insurers, totaled 1,060.3 trillion won as of end-September, up 22 trillion won during the July-September period last year.
"At the end of the year, the number of lenders and their average credit will likely increase to a large extent, reflecting the fact that household debts soared in August after the LTV and DTI ratios were eased," a banking official said, asking not to be named.
Experts and international organizations have warned South Korea of the risks of mounting household debts.
The International Monetary Fund (IMF) said that the growing household debts would hurt economic growth and domestic consumption when the United States raises its rate early next year.
A report by the Organization for Economic Cooperation and Development (OECD) also noted that the efforts to boost the housing market could lead to an increase in private sector debt, which could pose challenges for financial institutions and hurt private consumption. (Yonhap)
