[DigitalToday reporter Ji-young Lee (이지영)] The delinquency rate on won-denominated loans at South Korean banks rose for a second straight month due to an increase in new delinquencies and a decline in the amount of delinquent loans disposed of. The delinquency rate on loans to small and medium-sized enterprises rose to 1.00%.

The Financial Supervisory Service said on Tuesday that the delinquency rate on won loans at domestic banks stood at 0.67% at end-May, up 0.06 percentage point from end-April. It was up 0.03 percentage point from a year earlier.

New delinquent loans that emerged in May totalled 3.3 trillion won, up 400 billion won from the previous month. Over the same period, delinquent loans disposed of through write-offs or sales totalled 1.5 trillion won, down 100 billion won.

The new delinquency rate was 0.13%, up 0.01 percentage point from the previous month. It was down 0.01 percentage point from a year earlier.

The delinquency rate on corporate loans was 0.84%, up 0.10 percentage point from the previous month. The delinquency rate on loans to large companies was 0.27% and the delinquency rate on SME loans was 1.00%, up 0.05 percentage point and 0.10 percentage point, respectively.

Among SMEs, the delinquency rate for SME corporations was 1.11%, up 0.13 percentage point from the previous month, while the delinquency rate on loans to self-employed borrowers rose 0.06 percentage point to 0.84%.

The delinquency rate on household loans was 0.45%, up 0.03 percentage point from the previous month. The delinquency rate on mortgage loans was 0.31%, up 0.01 percentage point, while the delinquency rate on household loans excluding mortgages, such as credit loans, rose 0.07 percentage point to 0.90%.

The watchdog said, "With the delinquency rate continuing to rise, there is a need to prepare for the possibility that the upward trend could widen due to an increase in corporate lending from an expansion of productive finance and rising interest rates." It added, "We plan to strengthen soundness management so that the banking sector actively writes off and sells bad loans and builds sufficient capital and loan-loss reserves to increase loss-absorbing capacity," it said.