South Korea's financial watchdog is closely monitoring the recent fast-rising interest rates banks impose on loans, its head said Tuesday, amid the government's beefed-up efforts to tighten regulations on household borrowing.

Jeong Eun-bo, chief of the Financial Supervisory Service (FSS), made the remarks amid complaints that some top-tier banks are imposing higher interest rates on loans than cooperative banks, an unusual reversal of borrowing costs.

"Interest rates are determined by the market, and I think we have to respect the process based on the autonomy of the market," Jeong told reporters after holding a meeting with heads of major banks in Seoul. "(But) we are monitoring the overall trends of interest rates in the market very carefully."

Jeong also said he asked the bank chiefs to make loans available to people in actual need of money despite maintaining strict rules on lending.

Interest rates imposed on loans have been on the rise as the government is tightening regulations on lending amid worries about fast-growing household debt.

The Bank of Korea also raised its policy rate by a quarter percentage point in August and is widely expected to announce a further rate hike later this month.

According to central bank data, household credit reached a record high of 1,805.9 trillion won ($1.53 trillion) in end-June, up 41.2 trillion won from three months earlier.

In October, financial authorities said it will enforce stricter lending rules based on borrowers' repayment capability at an earlier date than scheduled to curb soaring household debt. (Yonhap)