By drawing a line between household and corporate loans in calculating the ratio, the new system will raise banks' average loan-to-deposit rate to 99.6 percent from 98.1 percent if they focus too much on household lending, the FSC said in a statement.

Financial authorities have urged banks and other financial institutions to channel funds into innovative businesses as part of the government's push for job creation.

At the end of last September, South Korea's household debt stood at 1,419.1 trillion won ($1,330 billion).

Although there is little risk that household debt could spark a financial crisis, household debt is growing faster than household income, choking off private consumption. (Yonhap)