The delinquency rate on won-denominated loans at domestic banks reached its highest level in 9 years and 7 months this past May.

In particular, the delinquency rate for small and medium-sized enterprise (SME) loans exceeded 1%, marking the highest level in 11 years.

According to the Financial Supervisory Service (FSS) today (July 22), the delinquency rate on won-denominated loans at domestic banks (based on overdue principal and interest of one month or more) stood at 0.67% as of the end of May, up 0.06 percentage points (p) from the previous month (0.61%).

This is the highest level since October 2016 (0.81%).

The rise in the overall delinquency rate is attributed to an increase in overdue payments across corporate loans, including those for large corporations, SMEs, and self-employed individuals, as the slump in domestic demand continues.

The corporate loan delinquency rate at the end of May was 0.84%, up 0.10 percentage points from the previous month.

The delinquency rate for large corporate loans stood at 0.27%, rising 0.05 percentage points from the previous month and 0.12 percentage points from the same month last year.

This is the highest figure in 4 years and 8 months since the end of September 2021 (0.28%).

The upward trend in the delinquency rate for SME loans was particularly notable.

The SME loan delinquency rate reached 1.00%, the highest level since May 2015 (1.11%).

Among SMEs, the delinquency rate for loans to small corporations was 1.11%, up 0.13 percentage points from the previous month, marking the highest level in 9 years since May 2017 (1.17%).

The delinquency rate for loans to self-employed individuals was recorded at 0.84%, an increase of 0.06 percentage points from the previous month.

The household loan delinquency rate rose by 0.03 percentage points from the previous month to 0.45%, though the increase was more limited compared to corporate loans.

The mortgage loan delinquency rate rose by 0.01 percentage points to 0.31%, while the delinquency rate for household credit loans, including credit loans, was 0.9%, up 0.07 percentage points from the previous month.

New overdue loans in May amounted to 3.3 trillion won, an increase of 400 billion won from the previous month (2.9 trillion won), while the volume of resolved overdue loans was 1.5 trillion won, a decrease of 100 billion won from the previous month (1.6 trillion won).

Consequently, the new delinquency rate rose by 0.01 percentage points from the previous month to 0.13%.

The FSS stated, "As there is a possibility that market interest rates may rise due to the recent impact of base interest rate hikes, we are monitoring the situation with vigilance."

It added, "We also plan to prepare for the possibility that the upward trend in delinquency rates may expand as corporate loans increase in line with the revitalization of productive finance."