Last year's figure marks the narrowest spread since 1999 when the related data began to be compiled. In that year, the comparable figure was 3.35 percentage points.

Lending rates plunged to an average of 3.62 percent last year from 10.65 percent in 1999, with rates for bank savings at a record low of 1.65 percent last year, the data showed.

The Bank of Korea, the country's central bank, kept its key rate steady at 1.5 percent for the month, extending its wait-and-see mode for the 11th consecutive month.

The central bank has stood pat on the policy rate since June 2015 after sending it to a record low level to bolster growth in Asia's fourth-largest economy.

The data also showed that the narrowed interest rate spread led to a sharp decline in their net interest margin, which roughly measures a lender's capability for its interest income.

Their net interest margin fell to a record low of 1.55 percent in the January-March quarter from 1.63 percent a year earlier.

To offset declines in net interest margins, local banks focused on beefing up their non-interest income such as commission income last year. Their combined commission income rose to 7.05 trillion won ($5.99 billion) last year from 6.7 trillion won a year earlier, an FSS official said. (Yonhap)