Outstanding Overdraft Loan Balance at Banks Nears 70 Trillion Won... Over 14 Million Won per Account

Biggest Surge Since "Donghak Ants" Boom in Late 2021
Overdraft Loan Balance Growth Concentrated Between April and July
Rising Interest Rates Increase Repayment Burden for Overdraft Borrowers

The outstanding balance of bank overdraft loans has increased by more than 6 trillion won from January to July this year, approaching 70 trillion won. This is the largest amount since the end of 2021, when a stock market boom followed the COVID-19 pandemic, and appears to be closely linked to the demand for so-called "debt-fueled investments" using borrowed money.

According to the data titled "Outstanding Overdraft Loan Balances by Bank," submitted by Representative Park Sunghoon of the People Power Party, a member of the National Assembly's Political Affairs Committee, on September 14, the outstanding balance of overdraft loans from domestic banks stood at 69.7283 trillion won as of the end of July, up 9.6% (6.0874 trillion won) from 63.6409 trillion won at the end of last year. This figure reflects the actual amounts borrowed and used by customers, not just the amounts approved by banks.

During the same period, the number of overdraft accounts increased from 4,869,319 to 4,893,636, a net rise of 24,317 accounts (0.5%). While the number of accounts grew modestly by 0.5%, the total outstanding balance surged by 9.6%. This indicates that overdraft users have drawn down more funds within their already approved credit limits.

The average balance per active overdraft account (i.e., per account not yet closed) climbed from around 13.07 million won at the end of last year to about 14.25 million won at the end of July this year, representing a 9% (1.18 million won) increase.

The bulk of the increase in overdraft loan balances this year occurred between April and July, when the balance jumped by 5.7827 trillion won—accounting for 95% of the yearly increase.

The outstanding balance as of July was the largest since the end of 2021 (70.1814 trillion won), based on quarter-end data. At that time, following the shock of COVID-19, a period of low interest rates and abundant liquidity pushed the KOSPI index past 3,000 for the first time, drawing attention to so-called "Donghak Ants" (individual retail investors).

This latest increase in overdraft balances is also believed to be closely related to investment in the stock market. The KOSPI index plunged to the low 5,000 range in March, following the outbreak of war in the Middle East between the United States and Iran, then began recovering in April. In May, leverage and inverse products linked to single stocks, such as Samsung Electronics and SK hynix, were released. Afterward, the KOSPI index broke through 9,000 in June before experiencing a sharp correction again in July.

The Bank of Korea also estimated in its Monetary Credit Policy Report, announced on September 10, that other forms of leveraged investment using financial institution loans—such as credit loans and policy loan borrowing against insurance contracts—increased sharply in the second quarter of this year.

The outstanding balance of overdraft loans is now approaching the peak at the end of 2021, but borrowers' principal and interest repayment burdens seem to have grown compared to that period.

The weighted average interest rate on overdraft loans, calculated based on the balances by bank, rose from an annual rate of 3.94% at the end of 2021 to 5.64% at the end of July this year—an increase of about 1.70 percentage points. In addition, as borrowing-based investment positions are rapidly liquidated due to corrections in the stock market, debt-fueled investors may be facing a diminished capacity to meet their repayment obligations.

Representative Park pointed out that the government must monitor not only overall loan volume, but also household funding circumstances and reliance on borrowing from multiple perspectives. He stated, "The fact that the number of accounts remains constant while amounts withdrawn from overdraft loans surge indicates that households are increasingly relying on emergency cash." He continued, "While household cash flow is deteriorating, simply managing the number of loans will not resolve underlying household debt problems."

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