The Bank of Korea said Thursday that it has decided to ease its credit policy to increase its supply of low-interest loans through commercial banks to small and medium enterprises.

The central bank raised its aggregate credit ceiling to 12 trillion won ($10.6 billion) from 9 trillion won, which has been maintained since October 2012.

Loans will be extended to SMEs and start-ups that have “exceptional” technology with interest rates of 0.5-1.25 percent, down from 1.25 percent through a rise in the aggregate credit ceiling.

“We are in the process of making a regulation (through which companies can receive funding),” a BOK official said, adding that companies whose technology has been certified by state-run organizations will be granted such loans.

It all comes down to improving the job market and the sustainability of SMEs and tech start-ups through the BOK’s credit-easing policy, the official said.

The rates on such loans to be facilitated by the central bank within one to two months are about 0.18 to 0.36 times its key base rate, by far the lowest since monetary policymakers began implementing credit policy in 1994.

The central bank said that it expects its credit easing will lead banks to lower their interest rates on other loan products for SMEs. The BOK’s credit facilitation accounts for about 10 percent of all SME loans.

The increase in the credit ceiling comes after the Ministry of Strategy and Finance unveiled its first package of economic measures that included boosting loans to SMEs through the aggregate credit system.

The move by the central bank is apparently in line with the government’s stimulus plan supporting the middle class and start-ups. It did not bow to external pressure by lowering its key base rate, but kept it unchanged at 2.75 percent at its monetary policy meeting, noting a global economic recovery.

Finance Minister Hyun Oh-seok told reporters in Sejong City that the ministry plans to devise extra budget through the issuances of state bonds, which market analysts suggest will create supplementary funds of around 17 trillion won.

He added that about 1 trillion won of the budget will be used to support low-income earners in purchasing their first apartments or in coming up with “jeonse,” a large tenant deposit refundable at the end of a housing contract.

This is part of efforts to revive the sluggish domestic housing market.

By Park Hyong-ki (hkp@heraldcorp.com)