South Korean banks’ household loans rise in May

South Korean banks' household loans rose in May from the previous month due to lowering of interest rates by some lenders and more purchases made with credit cards, the central bank said Thursday.

Local banks' household loans, including home-backed loans and credit loans, reached 455.8 trillion won (US$389.1 billion) as of the end of May, up 2.2 trillion won from a month earlier, according to the Bank of Korea (BOK).

Household lending rose during the month as people drew more mortgaged loans to take advantage of lower interest rates, it said.

There was also a rise in money borrowed from personal overdraft accounts and credit cards as people bought presents for Children's Day and Parents' Day.

The latest increase comes as the South Korean government and financial watchdog have been trying to put a lid on mounting household debts as heavy indebtedness is feared to squeeze private consumption, one of two growth engines of the domestic economy.

Home-backed loans increased by 1.3 trillion won last month from April, up from the 1.0 trillion won monthly gain reported in the previous month. Personal overdraft and credit card use rose by 900 billion won from a gain of 300 billion won tallied the month before.

South Korean banks' corporate lending also rose in May from the previous month fueled by demand from large companies, the BOK said.

Corporate loans by local banks gained 3.7 trillion won on-month to 581.3 trillion won, a decrease from the 6.3 trillion won on-month gain tallied in April.

Bank lending to large firms rose by 3.2 trillion won to 135.2 trillion won, while loans to smaller firms moved up by 500 billion won to 446.1 trillion won, according to the central bank. (Yonhap News)