South Korea's top financial regulator said Tuesday that it will cut the interest rate ceiling for subprime loans in order to ease burdens of low-credit borrowers.

The upper limit rate levied on such loans will be lowered to 29.9 percent later this year from 34.9 percent, according to the Financial Services Commission.

The upper rate for such loans is set in accordance with related regulations. The subprime loan rate has been on a steady decline since it fell to 49 percent from 66 percent in 2007.

The FSC said those who have low credit scores and borrowed money from secondary lenders of savings banks and leasing companies, such as Rush & Cash, a consumer financing brand of Japan's APRO Financial Group, will benefit from the rate cut.

"The maximum rate is applied to borrowers who have no access to the lower interest rate financial market," the FSC said. "It will ease the high interest rate burden of some 460 billion won ($417.2 million) of more than 27 million people."

South Korea's prime loan rates are set around 3 percent by local commercial banks while the country's key policy rate stands at a record low of 1.5 percent this month.

There were 8,794 registered financial institutions involved in the subprime loan business in South Korea as of June last year, with three big Japan-based firms -- APRO Financial, Sanwa Money and J Trust -- accounting for more than 40 percent of the country's market.

The three Japanese lenders' combined assets reached 4.3 trillion won at the cited time.

The FSC will also inject an additional 22 trillion won by 2018 into state-backed microfinancing services and debt-relief funds, to provide custom-tailored services to those in lower-income brackets.

Some 27 million poor and near-poor people will be subject to the expanded funds, it added.

The FSC said it has conducted an on-site inspection to check their financial status to draw up fine-tuned policies to help their financial recovery.

"We have made efforts to design suitable loan programs for low-income people lacking access to banking and related services and meet their demand for quality financial services," the FSC said. "We are aiming to help these people out of poverty." (Yonhap)