Kim Yong-beom, the Blue House deputy minister for policy, recently posted on his social media (SNS) that "the banking sector needs to change its lending structure that revolves around high-credit borrowers." In the industry, concerns are emerging that "the mandatory lending ratio for mid- to low-credit borrowers could be raised." Currently, the mandatory lending ratio for mid- to low-credit borrowers (the bottom 50% by credit score) applies only to internet-only banks, and if this ratio increases, banks could face soundness issues, such as a deterioration in arrears rates.
According to the financial sector on the 4th, Kim wrote on his Facebook the day before, "We need to shake up the composition of household loans so they are not confined only to the safe greenhouse of high-credit borrowers. It means changing the rules of the game so that growth is difficult if a certain segment is left empty. Only then will banks move."
The "certain segment" Kim refers to is mid- to low-credit borrowers, which is interpreted to mean that, in line with the government's inclusive finance policy, the banking sector should increase mid- to low-credit lending and change the lending structure that is focused on high-credit borrowers.
Internet-only banks are required to supply at least 30% of all unsecured credit loans to mid- to low-credit borrowers. The financial authorities plan to raise the mandatory ratio for mid- to low-credit borrowers, based on new originations, to 35% in 2028. An industry official said, "You can see that the financial authorities now have a possibility of setting a higher target than before. If the ratio goes up, it will be a considerable burden for internet-only banks."
As of the end of last year, the share of loans to mid- to low-credit borrowers at the three internet-only banks was 34.9% at Toss Bank, 32.5% at Kbank, and 32.1% at KakaoBank. For this year, mid- to low-credit borrowers are those with a KCB credit score of 875 or lower. The lending rate offered by the three internet-only banks to mid- to low-credit borrowers ranged from 4.76% to 6.97% as of last month.
The government and the financial authorities are currently applying strong household loan regulations. The outstanding loan balance of the five major banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) was 765.829 trillion won as of the end of March, down 1.9491 trillion won from the end of last year. Even mutual finance institutions such as the Korean Federation of Community Credit Cooperatives (KFCC), local agricultural cooperatives, and credit unions, which had been the places sought by those unable to borrow from commercial banks, are closing their lending windows to nonmembers.
Banking sector officials said, "If loans to mid- to low-credit borrowers increase, the arrears rate will rise and more loan-loss provision will have to be set aside. It may be fine for now, but in the long term it could affect soundness." Toss Bank's arrears rate rose from 0.72% in 2022 to 1.11% in 2025. Over the same period, KakaoBank's arrears rate also increased from 0.49% to 0.51%.