The Financial Supervisory Service (FSS) is giving additional household lending limits to smaller savings banks to boost mid-interest rate loans, Chosun Daily reports.

Regulators are trying to revive credit access for riskier borrowers while preventing default spikes at major lenders. Steering extra capacity to smaller institutions lets them offset non-performing debts from high-risk loans by expanding general consumer portfolios.

Mid-interest rate loans serve borrowers in the bottom 50% credit score bracket and have strict interest caps. High default rates make these loans risky for lenders. Savings bank delinquencies rose 0.22 percentage points to 6.26% at end of the first half 2026, prompting firms to cut back lending to safeguard balance sheets.

Mutual finance sector quotas are already complete. The FSS set a shared limit for Nonghyup, Suhyup, Shinhyup, and the Korean Federation of Community Credit Cooperatives, then gave extra room to firms with smaller mid-year loan overruns.

This adjustment helps Shinhyup and the Korean Federation of Community Credit Cooperatives, which hit 0% net increase caps last year. The Korean Federation of Community Credit Cooperatives received about KRW300bn ($221mn) in extra capacity. Shinhyup secured KRW100bn-KRW200bn.

The move follows macro-easing under the August 13 real estate plan, which raised the annual household debt growth target to 3% from 1.5%. The decision releases KRW30 trillion fresh credit across the financial system. An FSS official confirmed notifications to larger allocators are going out first.