Banks aim to cut household credit growth to 6% next year

The head of South Korea's state financial watchdog said Thursday local banks aim to cut the household credit growth rate to around 6 percent next year.

"The year 2017 is a very important time for our economy (in efforts) toward the soft landing of household debt (problem)," Zhin Woong-seob, governor of the Financial Supervisory Service, told reporters. "The authorities are making special efforts for an improvement in the quality of household debt and a gradual adjustment to its size."

Zhin Woong-seob, governor of the Financial Supervisory Service. (Yonhap file photo)

The massive volume of household debt is one of the biggest potential risks for the major Asian economy already under pressure from lackluster domestic consumption and weak exports.

Household debt here totaled 1,295.8 trillion won ($1,070 billion) as of end-September, up 11.2 percent on-year.

Household loan extended by local banks is projected to grow approximately 10 percent this year, a decline from 14 percent posted in 2015.

According to data on their business plans related to household loans, the growth rate will likely stand in the 6-percent range in the coming year, Zhin said.

If the trend continues, the household debt issue is expected to enter the soft landing phase in 2018, he added. (Yonhap)