"Unable to Pay Even Interest"... Non-Performing Loans at Top 5 Banks Surpass 6 Trillion Won for the First Time

Non-performing loan ratio reaches 0.34% as of end-June
First time since February 2020 during COVID-19
Corporate non-performing loans surge 36.4% in six months

The so-called "non-performing loans," where borrowers are unable to repay even the interest, let alone the principal, after taking loans from the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup), have for the first time in history surpassed KRW 6 trillion.

According to the financial industry on August 12, the total balance of non-performing loans at the five major banks at the end of the second quarter of this year stood at KRW 6.4108 trillion. This represents an increase of 28% from KRW 5.0065 trillion at the end of last year.

Non-performing loans refer to loans for which banks do not record interest as income or loans that have been overdue for principal and interest payments for more than three months. Due to factors such as borrower defaults or deterioration in repayment ability, it is difficult for banks to expect normal interest income, leading them to be called "non-performing loans."

This is the first time that the balance of non-performing loans at the five major banks has exceeded KRW 6 trillion. The proportion of non-performing loans among the total loans of the five major banks also reached 0.34% for the first time since February 2020, during the COVID-19 pandemic.

The balance of non-performing loans at the five major banks has been rising sharply every year: KRW 2.7902 trillion at the end of 2022, KRW 3.5090 trillion at the end of 2023, and KRW 4.3736 trillion at the end of 2024. The ratio of non-performing loans expanded from 0.18% at the end of 2022 to 0.21% at the end of 2023, 0.25% at the end of 2024, and 0.27% at the end of last year.

The situation is more severe in corporate loans than in household loans. The balance of corporate non-performing loans surged by 36.4% from KRW 3.4087 trillion at the end of last year to KRW 4.6498 trillion at the end of June this year. The proportion of non-performing loans among corporate loans increased by 0.1 percentage point, from 0.32% to 0.42%.

For household non-performing loans, the balance increased by 10.2% from KRW 1.5978 trillion to KRW 1.7610 trillion. The proportion of non-performing loans among household loans remained at a relatively low level of 0.09% for five consecutive quarters, from the end of March last year to the end of June this year.

The buildup of non-performing loans is attributed to a combination of factors: weakening borrowers' repayment capacity due to persistently high interest rates, delayed economic recovery, and sluggish domestic demand, as well as a decline in auction winning bid rates for collateral assets.

In response, banks are constantly monitoring loans with signs of default and providing tailored financial support—such as debt restructuring, maturity extensions, and new working capital—to borrowers with the potential for recovery.

For non-recoverable bad debts, banks are actively reducing non-performing loans through disposal and sales, while responding to rising bad loan ratios by increasing loan-loss provisions. An official from the banking sector said, "With sluggish domestic demand, worsening economic sentiment, and rising interest rates, the increase in non-performing loans is inevitable. We are maintaining constant monitoring by industry and region and taking proactive measures to resolve bad debts as well."

Sketch of commercial bank ATM. Photo by Hyunmin Kim kimhyun81@

This content was produced with the assistance of AI translation services.