South Korean bank minus account loans approach 70 trillion won

South Korean bank minus account (overdraft) loan balances have surged, approaching 70 trillion won as of July. Data from the Financial Supervisory Service shows the balance rose by 6.08 trillion won, or 9.6%, from the end of last year to July, despite the number of accounts increasing by only 0.5%.

This trend indicates that existing borrowers are utilizing more of their credit limits rather than new customers opening accounts. The average loan balance per account rose from approximately 13.07 million won at the end of last year to 14.25 million won in July. Much of this growth was concentrated between April and July, a period linked to increased leverage investing in the stock market.

Borrowing costs have also risen significantly. The average interest rate for these accounts climbed from 3.94% at the end of 2021 to 5.64% in July. Specific institutions saw notable increases, such as KakaoBank, where rates rose from 4.25% to 6.42%.

Concerns are mounting regarding household debt management and the ability of vulnerable borrowers to repay loans, especially as credit delinquency rates show signs of worsening. Additionally, unused credit limits totaling approximately 68 trillion won remain available, posing a potential risk for rapid debt expansion if market volatility triggers further demand for quick funds.