The bad loan ratio of South Korean banks dropped in the third quarter of this year from three months earlier on reduced fresh bad debts, the financial watchdog said Monday.

The combined bad loan ratio stood at 1.72 percent at the end of September, down 0.01 percentage point from the previous quarter, according to the Financial Supervisory Service. The bad loan ratio refers to the proportion of a bank’s non-performing loans 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.

Compared with a year earlier, the bad loan ratio of banks fell 0.07 percentage point, the FSS said.

The on-quarter decline came as the banks added less new loans than the previous quarter, with 5.6 trillion won in fresh bad loans for the July-September period, down from 5.8 trillion won. The lenders cleared off 5.3 trillion won in overdue debts over the cited period, down 1.4 trillion won from three months earlier.

The total bad loans extended by the banks reached 26.1 trillion won ($23.9 billion) for the three-month period, up 400 billion won from three months earlier, with 23 trillion won worth of corporate debts and 2.9 trillion won in household lending. (Yonhap)