The delinquency rate on won-denominated loans at Korean banks rose to 0.69 percent at end-August, extending an uptrend for a second straight month. The delinquency rate on loans to small and medium enterprises reached 1.00 percent, and SME corporates rose to 1.10 percent. Financial authorities see room for further increases in delinquencies in vulnerable areas such as SMEs and individual business owners, although the overall rate is below the long-term average.

The Financial Supervisory Service said on Thursday that the share of loans with principal and interest overdue by more than 1 month was 0.69 percent, according to its data on domestic banks' won-loan delinquency rates at end-August 2026. That was up 0.06 percentage point from 0.63 percent at end-July. It was 0.08 percentage point higher than 0.61 percent a year earlier.

The banking sector's delinquency rate rose for two straight months, from 0.56 percent at end-June to 0.63 percent at end-July and 0.69 percent at end-August. The FSS explained that delinquency rates tend to fall sharply at quarter-end as banks step up the cleanup of delinquent loans.

The delinquency rate on corporate loans rose 0.08 percentage point to 0.86 percent at end-August from 0.78 percent at end-July. It was also 0.13 percentage point higher than a year earlier.

By company size, the delinquency rate on loans to large firms rose 0.03 percentage point from the previous month to 0.39 percent. Loans to SMEs rose 0.09 percentage point to 1.00 percent.

Among SMEs, the delinquency rate on corporate loans rose 0.10 percentage point from the previous month to 1.10 percent. Delinquencies on loans to individual business owners also rose to 0.86 percent from 0.77 percent.

The delinquency rate on household loans rose 0.03 percentage point from a month earlier to 0.45 percent. Mortgage loan delinquencies rose 0.02 percentage point to 0.31 percent. Household loans excluding mortgages, including unsecured loans, rose 0.07 percentage point to 0.91 percent from 0.84 percent.

Newly 발생 delinquent loans in August totaled 3.0 trillion won, down 200.0 billion won from 3.2 trillion won the previous month. Delinquent loans handled by banks totaled 1.5 trillion won, up 100.0 billion won over the same period. Delinquent loans increased by 1.5 trillion won as new delinquencies exceeded the amount handled.

The new delinquency rate, calculated by dividing new delinquencies by the loan balance at end of the previous month, held at 0.12 percent, unchanged from July.

The FSS said the rise in delinquencies was concentrated among SME corporates and individual business owners, and household loans other than mortgages. It said the overall delinquency rate across the banking sector remains below the 10-year pre-COVID-19 average of 0.78 percent, and is within a manageable range in the mid to long term.

The FSS plans to encourage banks to strengthen soundness management by building loss-absorbing capacity and by selling and writing off non-performing loans, taking into account rising market interest rates and uncertainty in domestic and external economic conditions.

It also plans to check whether related rules are being followed so debtors' rights are not infringed during the sale and collection of delinquent loans. For borrowers with insufficient repayment capacity, it plans to expand debt restructuring to reduce repayment burdens.