The bad loan ratio of South Korean banks edged down in the second quarter of this year from three months earlier on a rise in cleared debts, the financial watchdog said Friday.

The combined bad loan ratio stood at 1.5 percent at the end of June, down 0.06 percentage point from the previous quarter, according to the Financial Supervisory Service.

The bad loan ratio refers to the proportion of a bank's non-performing loans to their total lending. A debt that has been in arrears for more than 90 days and is at risk of default is considered an NPL.

Compared with a year earlier, the bad loan ratio of banks fell 0.23 percentage point, the FSS said.

The lenders cleared off 6.4 trillion won in the April-June period, up from 4 trillion won three months earlier, while fresh bad loans increased to 5.8 trillion won from 4.4 trillion won over the three-month period.

The total bad loans extended by the banks reached 24 trillion won ($20.2 billion), down 700 billion won from three months earlier, with 21.6 trillion won worth of corporate debts and 2.3 trillion won in household lending. (Yonhap)