The amount of loans extended by South Korean banks to small and medium enterprises (SMEs) increased at the fastest clip in seven years in the first quarter on a government push to expand policy loans to spur growth, data showed Wednesday.

Outstanding loans extended to smaller firms reached 522.2 trillion won ($482 billion) as of the end of March, rising 15.4 trillion won from the end of last year, according to the data by the Bank of Korea. The on-quarter gain marks the biggest increase since a 19.3 trillion won gain in the second quarter of 2008.

The amount accounts for a bulk of the 15.8 trillion won on-quarter gain in overall corporate loan growth. It is also equivalent to nearly half of the 33.5 trillion won growth in such loans last year.

Market watchers attributed the fast rise to policy efforts aimed at providing loans to SMEs with high-growth potential technologies to protect them from falling into liquidity squeezes.

In August, the financial regulator unveiled a set of measures for this goal, such as giving incentives to banks that extend loans to technology start-ups.

"It seems that policy factors, including the expansion of loans to technology start-ups, were the main factor for the rise in SME loans," a BOK official explained. (Yonhap)