South Korea's central bank said Thursday it will extend financial support for smaller merchants and firms by six months to help them ease a funding squeeze amid the COVID-19 pandemic.

The financial support of low-rate loans worth 16 trillion won ($14.1 billion) had been scheduled to end this month, but the Bank of Korea (BOK) said the scheme will be put in place by September.

Under the scheme, the BOK provides funds to local banks at an interest rate of 0.25 percent to encourage them to extend lending to smaller merchants and companies.

Of the funds, 3 trillion won will be set aside for small merchants hit hard by the virus outbreak.

The remaining 16 trillion won will be reserved for lending to small- and medium-sized firms, the BOK said. (Yonhap)