After Deposit Rate Cut, H&CB Also Lowers Retail Lending Rate

The commercial lender H&CB lowered the prime lending rate for retail borrowers Wednesday, and other banks are expected to follow suit. The move ends the hesitation to lower lending rates even as the banks trimmed the rates paid on deposits.

H&CB lowered its prime rate for housing and consumer loans for terms of more than one year by 0.25 percentage point to 9.5 percent. Its rate on unsecured loans was lowered by 0.3 percentage point.

The drop in the prime rate applies to the bank's housing loans and consumer loans with residential property as collateral. The rate for one-year consumer loans was lowered to 9.45 percent from 9.75 percent. The change is expected to cost the bank about $40 billion won ($32 million) in profits.

The bank said the rate change applies to existing borrowers as well as new applicants.

An official at another commercial bank said, "It is a difficult time for the banks, but the continued low interest rates are giving us very little choice." The rate change came as existing customers protested the 7.9-percent rate offered new borrowers, he said. Some existing borrowers were paying as much as 12-percent interest.

The rate decline is expected to be adopted at other banks that have held their prime lending rates at 9.75 percent.

The Industrial Bank of Korea's prime rate for small and medium business borrowers was lowered to 9.2 percent from 9.5 percent late last month.

The National Agricultural Cooperative Federation said it will lower its savings deposit rate by as much as 0.4 percentage point. The move would be the first to put a deposit rate under 6 percent.

by Cheong Chul-gun