South Korea's top financial regulator said Sunday that it will push the Korea Development Bank to sell its stakes in companies purchased through debt-for-equity swaps within three years as part of its plan to overhaul the state-run policy lender.

The plan is a response to rising criticism that a large amount of taxpayer money will go down the drain in the wake of the KDB's decision to bail out a financially troubled shipbuilding company despite a slim chance for its revival.

Last week, creditor banks led by the KDB said they will funnel 4.2 trillion won ($3.7 billion) into Daewoo Shipbuilding & Marine Engineering Co., the country's second-largest shipyard, to help it stay afloat, following massive quarterly losses stemming from a downturn in the overall shipbuilding sector.

The government and the KDB, the biggest shareholder of Daewoo Shipbuilding, have been under fire for mishandling cash-strapped industry heavyweights and pouring taxpayers' money into rescuing the highly indebted company.

The KDB holds more than a 5 percent stake in 377 businesses worth 9.2 trillion won mostly through debt-for-equity swaps and equity investments, with the number of units with a 15 percent stake reaching 118.

The Financial Services Commission, the financial regulatory authority, will have the KDB sell off its stakes in companies that have already completed restructuring or racked up profits and make fresh investments in new prospective businesses in the coming three years.

Small and medium-sized enterprises that the KDB has held for more than five years will be also subject to the sale, the FSC added.

Five firms have been normalized already, and 86 SMEs have surpassed the five-year period, according to the FSC.

"The KDB will map out the sale schedule for the subjected companies and monitor their performances on a regular basis," said Sohn Byung-doo, director-general of the Financial Policy Bureau at the FSC.

"The FSC will guide the KDB to form a special board to oversee the lender's entire process on purchase, management and sale of its affiliated companies."

The FSC said that the KDB will focus more on midsized companies, instead of large companies, raising such loans to 30 trillion won, or 50 percent of its entire credits, by 2018, from 21.6 trillion won, or 35 percent, in 2014.

The Industrial Bank of Korea will provide 15 trillion won, or 30 percent of its total corporate lendings, to venture startups and fledgling firms, up from 9.1 trillion won, or 19.8 percent, in 2014. (Yonhap)