SEOUL, June 21 (Korea Bizwire) — Bank lending to households and businesses in South Korea has been rising at a fast clip over the past year as interest rates remain persistently low, central bank data showed Sunday.
Outstanding bank loans to household and corporate borrowers came to 1,302.4 trillion (US$1.19 trillion) as of last Monday, up more than 100 trillion won from the start of August last year, according to the data by the Bank of Korea (BOK).
Bank lending to companies stood at some 700 trillion won, with the remainder owed by households.
Analysts attributed the surge in household and corporate debt to the central bank’s aggressive easing campaign to help prevent Asia’s fourth-largest economy from losing growth momentum.
Since August last year, the BOK has trimmed the key rate by a cumulative 1 percentage point through four rate cuts in a bid to prop up the economy.
In the latest easing move, the central bank cut the benchmark interest rate to a record low of 1.5 percent from 1.75 percent earlier this month to counter the fallout of the Middle East Respiratory Syndrome (MERS) outbreak.
Since the first case was diagnosed on May 20, the MERS outbreak has sparked concern it could dampen already feeble private consumption and stymie the recovery of the economy struggling with slumping exports.
Market watchers expressed worries over the rapid increase in household and corporate loans, saying a rise in defaults could pose a threat to the financial market.
The government has decided to come up with measures next month to effectively control rising household debt.