Growth of household debts slows down for 11th month

The growth of household debt in South Korea lost steam for a 11th consecutive month as of July from a year earlier, largely due to government efforts to curb its increase, central bank data showed Sunday.

Household loans extended by depository financial firms grew at a rate as low as 4.6 percent at the end of July from a year earlier, compared with the 8.6 percent tallied in the previous year, according to the data by the Bank of Korea (BOK).

The growth rate hit 8.8 percent on-year in August 2011, before heading steadily downward every month, the data showed. It stood at 7.8 percent in Dec. 2011, dropped to 7.2 percent in January of this year and again decreased to 5.5 percent in May.

Such a slowdown came as the government has ramped up efforts to stem the rise in household debts, which ballooned to 922 trillion won (US$829 billion) as of June. 

The Financial Services Commission, the financial regulator here, has called on local lenders to defer the repayment period for borrowers with default risks and lower lending rates for embattled borrowers in a bid to help lift their financial burdens.

"The efforts made by the government and regulatory bodies seem to have paid off," said a BOK official, adding "it is a good sign that they've slowed down for the past 11 months."

According to the data, the growth of household debts extended by non-banking financial firms, such as savings banks, sharply declined. It plunged to 9.6 percent, from 15.4 percent over the cited period.

The corresponding figure for banks sank to 2.7 percent in July, compared with 6.5 percent as of Oct. 2011.

The growth rate of household debts overall was 0.3 percent as of the end of July, according to the central bank.

(Yonhap news)