In Seoul's secondary financial institutions, lending rates on unsecured loans at NongHyup and livestock cooperatives vary by more than 2 percentage points (P) depending on the cooperative. Even with the same credit grade, the interest you pay differs by cooperative. In commercial banks, which are primary financial institutions, the difference in lending rates by bank does not exceed 0.5 percentage point under the same conditions.
A tally of average unsecured loan rates as of the end of November at 17 Seoul-area agricultural and livestock cooperatives on the 21st found that the annual rate for borrowers with credit grades 1–2 at Seoul Gangdong and Seoul Gyeonggi Yangdon NongHyup was 6.5%, which was 2.03 percentage points higher than the rate at Seoseoul NongHyup (4.47%) under the same conditions. The average rate was calculated as a weighted average by loan amount based on new originations over the past three months.
In the 3–4 credit grade band, the gap between Gangnam NongHyup (4.49%) and Seoul Gangseo NongHyup (6.5%) was the largest at 2.01 percentage points. In the 5–6 grades, the spread widened to 2.29 percentage points between Songpa NongHyup (5%) and Seoul Gangdong NongHyup (7.29%).
An inversion where rates for lower-credit borrowers are lower than those for higher-credit borrowers is also occurring. While Seoul Gangseo NongHyup's 1–2 grade rate was 6.5%, Songpa NongHyup's 5–6 grade rate was 5%. At Gangnam NongHyup, the 1–2 grade rate (4.89%) was higher than the 3–4 grade rate (4.49%).
Local agricultural and livestock cooperatives are mutual cooperatives, and each cooperative operates independently. Because funding costs differ by cooperative, benchmark rates vary, and preferential-rate benefits are applied differently. Lending rates at local agricultural and livestock cooperatives are typically higher than at commercial banks, but members can receive preferential-rate benefits.
An official at the National Agricultural Cooperative Federation said, "Differences in operating costs such as selling and administrative expenses by cooperative create a structure where benchmark and additional rates diverge," and noted, "We are applying rate management standards in compliance with the Financial Supervisory Service's exemplary standards on lending rates."
There are concerns that lending rates differing by more than 2 percentage points despite similar credit grades could become an equity issue. Commercial banks also show rate differences by bank, but cases exceeding 1 percentage point are rare. According to the Korea Federation of Banks, as of last month, the maximum difference in average household loan rates for the 801–1000 credit score band at commercial banks was 0.5 percentage point.
During the National Assembly audit on Oct. in, concerns were also raised about rate disparities at local agricultural and livestock cooperatives. The argument was that gaps of 1.5–2.2 percentage points in lending rates between members and nonmembers amount to discrimination. National Agricultural Cooperative Federation Chairman Kang Ho-dong said at the time, "Rate differences do not align with the principle of equity. We will review various measures and come up with improvement plans."