SME Loan Delinquency Rate Surpasses 1% for First Time in 9 Months... Warning Signs of Deterioration

Rising Repayment Burdens Amid Sluggish Domestic Demand and Middle East Risks Financial Supervisory Service: "Delinquency Rates May Continue to Rise" The delinquency rate for loans to small and medium-sized corporations in the banking sector has once again exceeded the 1% level for the first time in nine months. In addition to the delayed economic recovery, a combination of prolonged instability in the Middle East and both domestic and international risk factors—such as high interest rates, a strong dollar, and rising oil prices—has rapidly increased the repayment burden on small and medium-sized enterprises (SMEs) and self-employed business owners. According to the Financial Supervisory Service's provisional report, "Status of Delinquency Rates on Won-denominated Loans at Domestic Banks as of the End of February," released on April 17, the delinquency rate for loans with principal and interest overdue by one month or more was recorded at 0.62%. This is up by 0.06 percentage points from the previous month and 0.04 percentage points year-on-year. It marks the highest level since May of last year (0.64%). The increase in delinquency rates was particularly notable in the corporate loan segment. The delinquency rate for corporate loans stood at 0.76%, up by 0.09 percentage points from the previous month. Among these, the delinquency rate for large corporation loans rose by just 0.06 percentage points to 0.19%. However, the delinquency rate for SME loans climbed by 0.1 percentage points to 0.92%. The situation has deteriorated even more severely among small and medium-sized corporations. The delinquency rate for loans to small and medium-sized corporations reached 1.02%, a 0.13 percentage point increase from the previous month, surpassing the 1% level for the first time in nine months since May of last year. This is attributed to a rapidly worsening business environment, as domestic demand continues to stagnate and the burden of oil prices, exchange rates, and interest rates intensifies. The delinquency rate for individual business owners also increased by 0.07 percentage points to 0.78% compared to the previous month. Household loan delinquency rates also rose slightly. The overall delinquency rate for household loans was 0.45%, up by 0.03 percentage points from the previous month. The delinquency rate for mortgage loans stood at 0.31%, while the delinquency rate for household loans excluding mortgage loans (such as unsecured loans) was 0.9%. These figures represent increases of 0.02 percentage points and 0.06 percentage points, respectively, over the same period. Newly delinquent loans also increased. In February, the total amount of newly delinquent loans was KRW 3 trillion, up KRW 200 billion from the previous month. The amount of resolved delinquent loans was KRW 1.3 trillion, remaining at a similar level to the previous month. As a result, the new delinquency rate rose by 0.01 percentage points month-on-month to 0.12%. The Financial Supervisory Service highlighted the need to prepare for the possibility that the upward trend in delinquency rates will continue for the time being. An official from the Financial Supervisory Service stated, "Delinquency rates are on the rise, especially among small and medium-sized corporations," and added, "Given the ongoing domestic and global uncertainties, this upward trend could persist." The official continued, "We plan to strengthen monitoring of vulnerable sectors and guide the banking sector to reinforce asset quality management by encouraging sufficient loan-loss provisioning and proactive collection or sale of delinquent loans." 한글 기사 보기 This content was produced with the assistance of AI translation services. © The Asia Business Daily(www.asiae.co.kr). All rights reserved.