Savings banks cut lending rates in JuneSavings banks in Korea reduced their lending rates in June, industry sources said Tuesday, amid regulators’ pressure on them to abstain from charging borrowers exorbitant interest.
The average interest on unsecured household loans extended by the country’s top 10 savings banks by assets was 0.11 to 4.75 percentage points lower in June than six months earlier, according to the Korea Federation of Savings Banks.
Industry leader SBI Savings Bank’s lending rates for household loans averaged 21.14 percent last month, 0.47 percentage points lower than in December last year.
JT Chinae Savings Bank reduced its average interest on unsecured household loans the most over the cited period, decreasing it by 4.75 percentage points.
Their rate cuts were in marked contrast to rate hikes by major commercial lenders in Asia’s fourth-largest economy during the same period.
The average lending rate on credit loans extended by South Korea’s top five commercial lenders - KB Kookmin, Shinhan, Woori, KEB Hana and NH Nonghyup - rose to 4.23 percent from 4.1 percent over the cited period.
Market watchers said savings banks appear to have caved to pressure from financial authorities that criticized them for charging too high interest and threatened to crack down on such institutions.
In February this year, the government lowered the upper limit on interest charged by lending institutions to an annual 24 percent from 27.9 percent. High credit risks, which can’t get access to commercial bank loans, usually turn to high-charging savings banks in Korea.