Repayment Burden Rises as Interest Rates Soar... SME Delinquency Rate Increases
Delinquency Rate on Won-Denominated Loans at Five Major Banks Rises by 0.1 Percentage Points in Two Months
As interest rates have risen rapidly, the repayment burden for vulnerable borrowers—including self-employed individuals and small and medium-sized enterprises (SMEs)—is increasing quickly. While delinquency rates are rising overall, the deterioration in asset quality is particularly pronounced in the SME sector.
According to the financial sector on March 22, the simple average delinquency rate (overdue by one month or more) on all won-denominated loans at the five major banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) stood at 0.46% as of the end of February. This represents a 0.1 percentage point increase over the past two months, compared to 0.36% at the end of December last year.
By borrower type, segments with higher concentrations of vulnerable borrowers saw sharper increases. The household delinquency rate rose by 0.05 percentage points to 0.35% compared to the end of last year, while the delinquency rate for large enterprises increased by 0.08 percentage points to 0.11%. In contrast, the delinquency rate for SMEs jumped by 0.17 percentage points to 0.67%, recording the largest increase. The overall corporate delinquency rate also climbed by 0.15 percentage points to 0.56%. This indicates that the burden is particularly concentrated in the SME sector, which includes self-employed individuals and small business owners who are directly affected by rising interest rates and sluggish economic conditions.
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The ratio of non-performing loans (NPLs), which measures asset soundness, showed a similar trend. The NPL ratio for all won-denominated loans at the five major banks was 0.40% at the end of February, up 0.06 percentage points from 0.34% at the end of last year. Among these, the NPL ratio for SMEs increased the most, rising by 0.12 percentage points from 0.48% to 0.60%. This indicates that the risk of insolvency is expanding rapidly, particularly among vulnerable borrowers.
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