The delinquency rate on loans extended by South Korean banks, including household borrowing, rose for a second consecutive month in February amid concerns that snowballing household debts in the country could pose a threat to much-hoped economic expansion, the financial watchdog said Tuesday.

The average bad loan rate for banks stood at 0.77 percent at the end of February, up 0.06 percentage point from a month earlier, according to the Financial Supervisory Service.

It dropped to a five-year low of 0.64 percent in December last year, but rebounded to 0.71 percent in January.

Over the cited period, 1.8 trillion won ($1.6 billion) worth of fresh bad loans were added, with 900 billion won of debts written off, the FSS said.

The overdue rates of corporate debt inched up 0.08 percentage point on-month to 0.94 percent, with those for household loans gaining 0.04 percentage point to 0.57 percent.

Loans with both the principal and interest overdue by more than one month are considered delinquent in South Korea.

The outstanding amount of won-denominated loans came in at 1,273.9 trillion won as of the end of February, up 9.7 trillion won, or 0.8 percent, from the previous month.

Those extended to households reached 522 trillion won, up 3.4 trillion won over the cited period, while corporate loans rose 5.4 trillion won to 719.4 trillion won, the watchdog said.

The Bank of Korea slashed the key policy rate by a quarter percentage point to a record low of 1.75 percent earlier this month in line with the Seoul government's economic stimulus plan. Last year, the central bank slashed the base rate by a combined half percentage point to help Asia's fourth-largest economy expand. (Yonhap)