South Korean banks’ household loans contracted in March from the previous month as people borrowed less money using their overdraft accounts, the central bank said Thursday.

Local banks’ household loans, including home-backed loans and credit loans, reached 452.3 trillion won ($393.6 billion) as of the end of March, down 413.9 billion won from a month earlier, according to the Bank of Korea.

Lenders’ household loans fell last month after rising by 464.8 billion won in February, as loans secured by mortgage moved up mildly and people reduced loans from their personal overdraft accounts, the BOK said.

The fall comes as the South Korean government and financial watchdog have been trying to put a lid on mounting household debts as heavy indebtedness is feared to squeeze private consumption, one of two growth engines of the domestic economy.

Home-backed loans increased by little under 1.1 trillion won last month from February, compared with a 606.5 billion won gain in the previous month.

South Korean banks’ corporate lending rose in March from the previous month fueled by demand from both large and smaller-sized companies, the BOK said.

Corporate loans by local banks gained 3.2 trillion won on-month to 571.3 trillion won in the cited month, with the growth speed falling short of the 5.1 trillion won gain in February, according to the central bank.

Bank lending to large firms expanded sharply by 3.2 trillion won to 125.4 trillion won, while loans to smaller firms grew by 2.1 trillion won to 445.8 trillion won, it said. 

(Yonhap News)