High-rise buildings are seen in this cityscape photo of Yeouido, a business-financial district in Seoul. / gettyimagesbank

Major commercial banks have been bolstering their loan businesses focused on corporate clients, in response to the government's policy direction aimed at curbing household debt.

According to the latest figures compiled by the banking industry earlier this week, the cumulative outstanding balance of corporate loans provided by Korea's five major commercial banks — KB Kookmin, Shinhan, Hana, Woori, and NH NongHyup — increased by approximately 26 trillion won ($19 billion) from the end of January to late April, from 770.1 trillion won a year ago.

Corporate loans are an area that the five major banks have been prioritizing lately, as they face the government's multi-layers of strict regulations imposed on household loans. Despite household loans being the commercial banks' key source of revenue, the lenders have been met with increased pressures from the government to lower interest burdens of middle- and lower-income households.

Against the backdrop, major banks are fiercely competing to attract more corporate clients by introducing specialized exclusive services for businesses.

For instance, Shinhan Bank, which posted the highest corporate loan growth rate during the first quarter, newly launched a department solely dedicated to corporate loan businesses. The move aimed at shattering previous practices of separately operating the sales and credit assessment for corporate loans. The new department has enabled more effective and faster decision-making in corporate loan businesses, allowing collaborations on both sales and credit-assessments.

Likewise, Woori Bank launched "One Biz Plaza" in last year in its effort to strengthen corporate finance. This initiative involves setting up specialized offline banking branches in areas with a high concentration of businesses, such as industrial complexes and digital districts, to provide tailored services to corporate clients.

KB Kookmin Bank has streamlined the corporate loan process for individual business owners since the second quarter last year, allowing some of them to take out loans without the need to visit a bank branch.

Hana Bank has also actively been introducing special loan products tailored for SMEs and individual business owners. This approach is also taken by NH NongHyup Bank, which is aggressively promoting its corporate business operations by launching a specialized loan product targeting SMEs. This loan product offers preferential interest rates and increased credit limits to companies that can demonstrate their innovative growth.

However, given that slightly more than the half of the increased corporate loan amount — some 13.6 trillion won — during the past three months went to small and medium-sized enterprises (SMEs) or self-employed business owners, there are increased concerns about rising delinquency, particularly among loans to individual business owners. This has led to calls for strengthened risk control management of loans to ensure financial stability.

At the end of the first quarter of this year, the total amount of delinquent loans to individual business owners that have past due for one month or more at the five major banks reached 1.35 trillion won, which is a 37.4 percent increase from 987 billion won recorded at the end of the first quarter of last year.