The ratio of bad loans at South Korean banks fell last year from a year earlier, including in corporate and household sectors, the financial watchdog said Wednesday.

The ratio of non-performing loans held by 18 local banks stood at 1.53 percent at the end of 2014, down 0.26 percentage point from the previous year, according to the Financial Supervisory Service (FSS).

Compared with the previous quarter, the ratio fell 0.19 percentage point, the FSS said.

The bad loan ratio refers to the proportion of a bank's non-performing loans (NPLs) to their total lending. A debt that has been in arrears for more than 90 days and is at risk of default is considered an NPL.

The on-year decline came as the banks added less new loans than last year. There were 23 trillion won (US$21 billion) in fresh bad loans, down 8.6 trillion won.

The lenders cleared off 25 trillion won in overdue debts over the cited period, up 600 billion won from a year earlier.

The total bad loans extended by the banks reached 23.8 trillion won for the one-year period, down 2 trillion won from a year ago, with 21.1 trillion won worth of corporate debts and 2.6 trillion won in household lending.

The bad loan ratio for corporate debts came to 2.05 percent as of end-December, down 0.34 percentage point from a year ago. The corresponding figure for household loans fell 0.11 percentage point to 0.49 percent over the cited period. (Yonhap)