From left to right: South Korea's major commercial banks, KB Kookmin Bank, NH Nonghyup Bank, Shinhan Bank and Woori Bank

South Korea's household credit increased at a faster rate in October due to rising loans from savings banks and credit unions despite the government's efforts to curb household debts, financial data showed Sunday.

Outstanding household credit extended by all financial institutions, including commercial banks, savings banks, and insurance and securities firms, rose by 6 trillion won ($4.35 billion) from a month earlier in October, accelerating from a 5.2 trillion-won increase in September.

Loans from South Korea's five major commercial banks, including KB Kookmin Bank, Shinhan Bank and Hana Bank, gained by 1.1 trillion won last month.

However, those from thrift institutions, like savings banks and internet banks, and credit unions rose by 2 trillion won, marking the largest on-month gain in nearly three years since November 2021.

The sharp rise came as retail banks tightened their loan screening process in response to the government efforts to manage the growth of household debt.

"The continued slowdown in the growth of household loans from banks is a positive sign," said a financial authority official. "The secondary financial sector also began strengthening household loan management from September. We anticipate seeing more effects from these measures in the coming months."

Household loans from banks continued to grow for five consecutive months from April, largely due to rising home prices in Seoul and surrounding areas.

To slow the rise in household debt, the South Korean government has implemented various policies, urging local banks to tighten lending practices.

To comply with them, banks have raised interest rates and toughened lending rules. (Yonhap)