[Alpha Biz= Paul Lee] South Korea’s internet-only banks are tightening credit lending standards, aligning with regulators’ efforts to curb household debt growth and rising “debt-fueled investing” in the stock market.

According to financial industry sources on June 16, KakaoBank will lower the maximum limit for overdraft credit lines (so-called “minus accounts”) from 240 million won to 100 million won starting June 22. Currently, loans are issued within borrowers’ annual income limits under the debt service ratio (DSR) framework.

Beginning next month, KakaoBank will also tighten renewal criteria. Accounts with utilization rates below 20% over the past six months and credit limits exceeding 50 million won will see their limits reduced by up to 20% upon renewal.

The bank will continue to manage new loan applications as well, restricting approvals if internal thresholds are exceeded. However, loan products for mid- to low-credit borrowers will be excluded from these controls.

K Bank has also suspended new applications for overdraft credit lines from June 16 through July 31, citing the need for stable household loan management.

Meanwhile, Toss Bank is reviewing plans to reduce loan limits, with proposals under discussion to cut unsecured credit loan caps from 300 million won to 100 million won, and overdraft limits from 100 million won to 50 million won.

The tightening measures come amid a sharp increase in household debt. Total household lending across financial institutions rose by 9.3 trillion won last month—roughly three times the increase recorded the previous month. Notably, unsecured credit loans rebounded from a decline of 900 billion won to an increase of 3.4 trillion won.

Financial authorities have urged banks to strengthen self-regulation of household lending, citing growing demand for leveraged stock investments amid the recent market rally.

 

 

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