Korean Banks Move to Lower Lending Limits for Overdraft Accounts

​​Major Korean banks have started lowering limits for overdraft account products, amid a move by financial regulators to curb the accumulation of household debt.

South Korean banks are reportedly set to tighten lending rules for overdraft accounts in an effort to curb the country's growing household debt.

Five major banks are also looking to lower borrowing limits to avert a sharp rise in household debt.

Industry data shows that KB Kookmin, Shinhan, Woori, Hana and NH NongHyup have started lowering limits for their key overdraft account products designed for high-income individuals and professionals from an average KRW 200 million (USD 179,500) to about KRW 100 million.

Woori is said to have lowered the limit for its two key overdraft account products from the initial KRW 200 million and KRW 300 million to KRW 100 million in both cases.

The relatively low-risk overdraft accounts are conventionally popular among borrowers.

The tighter overdraft rules come as Korean regulators move to also tighten the DSR (debt service ratio) rules on borrowers, especially for high-income individuals with annual salaries of over KRW 80 million and over KRW 100 million of unsecured loans. The aim is to curb the rapid growth of household debt.

Korean households saw their collective debt reach 191 percent of their net disposal income as of 2019, up from the ratio of 184 percent a year earlier, according to OECD data.