South Korea's major banks likely to retain aid for small firms

Authorities are seen to ask banks to extend support beyond September.

South Korea’s smaller firms and one-man businesses will likely continue to enjoy financial aid from major banks to weather through the effects of the pandemic, reports Yonhap News Agency.

KB Kookmin, Shinha, Hana, Woori and NH Nonghyup have extended about $32.8b (KRW39t) to virus-hit borrowers through loan rollovers or delayed interest payments since February, in line with government efforts to help SMEs (SMEs) and self-employed people overcome the economic slump.

The financial aid is set to expire at the end of September, but analysts expect banks to extend their support at the request of financial authorities. Industry watchers said banks seem to agree on loan rollovers but are opposed to postponing interest payments by marginal firms, or those that can't cover interest payments with operating income.

Bank officials fear that a rise in marginal firms could lead to more bad loans and drag down their financial health. Despite their concerns, the delinquency rate for South Korean banks' won-denominated loans is still at rock bottom amidst record low borrowing costs.

In a meeting with the heads of local financial associations last week, Financial Services Commission (FSC) chairman Eun Sung-soo reportedly called for their cooperation in extending the move at the end of next month.