ATMs of major banks are installed in a building in Seoul, Oct. 1. Yonhap

Domestic banks' delinquency rate, based on loans with principal and interest overdue by more than one month, has steadily increased following the end of the COVID-19 pandemic, reaching its highest level in 69 months.

According to the Financial Supervisory Service (FSS), Friday, the bank delinquency rate stood at 0.53 percent in August, up 0.06 percentage point from the previous month. Compared to the same month last year, it rose by 0.1 percentage point.

The delinquency rate for August reached the highest level since November 2018, when it was 0.6 percent.

After falling to 0.2 percent in June 2022, the rate has been steadily climbing. The increase is largely attributed to the impact of high interest rates and the economic downturn, which have led to an increase in non-performing loans.

The delinquency rate has increased across all sectors, except for loans to large corporations.

The delinquency rate of corporate loans stood at 0.62 percent, up 0.09 percentage point from the previous month.

The rate for loans to large corporations remained unchanged from the previous month at 0.05 percent. In contrast, the delinquency rate of loans to small- and medium-sized enterprises (SMEs) increased by 0.11 percentage point from the previous month to 0.78 percent.

The delinquency rate rate of household loans rose to 0.4 percent, an increase of 0.02 percentage point from the previous month.

Among household loans, the figure for mortgage loans increased by 0.01 percentage point to 0.26 percent, compared to the previous month.

The figure for other household loans, such as credit loans, rose to 0.82 percent, up 0.06 percentage point from the previous month.

The financial watchdog pointed out that the current delinquency rate is not at a concerning level, given that the 10-year average rate prior to the COVID-19 pandemic was 0.78 percent for domestic banks.

“The current rate is still lower than the long-term average before the pandemic, and the loss-absorption capacity of domestic banks has significantly improved compared to the past, making it manageable,” an FSS official said.

“If the effects of the interest rate cut becomes more pronounced, the repayment burden on borrowers is expected to ease. However, the new delinquency rate remains high, particularly among small corporations and individual business owners, so there is a need to prepare for potential increases in credit losses for the time being.”