IBK, the Industrial Bank of Korea, will write off 120 billion won ($88 million) in long-overdue debt by the end of the year, freeing about 5,000 vulnerable borrowers from collection efforts.
The state-run lender decided to cancel the debt within the year, financial industry sources said on the 26th. The debt is held by some 5,000 borrowers in financial distress.
The first round, covering 67.5 billion won held by about 3,600 borrowers, will be written off by September. It targets debt that has been classified as distressed for more than five years with a balance of 5 million won or less, as well as debt classified as distressed for more than seven years with a balance of 100 million won or less.
A second round of 52.5 billion won held by about 1,400 borrowers will be canceled by the end of December. That debt has been classified as distressed for more than five years with a balance of 100 million won or less. The bank expects the move to help financially excluded people worn down by prolonged debt collection ease their financial burden and return to normal life.
IBK is also reviewing an additional write-off of debt left out of these rounds, worth about 53 billion won and held by an estimated 1,600 to 1,700 borrowers. "The aim is to support the recovery of vulnerable people who cannot escape the cycle of long-term debt," an IBK official said. "We will continue to support marginalized neighbors through active inclusive finance."
The bank has also set a goal of supplying more than 30 trillion won by 2030 to help vulnerable groups get back on their feet. In late July, it launched the "IBK Fair-Rate Inclusive Loan," which lends up to 20 million won at an annual rate of 4.9% to borrowers in the bottom 50% of credit scores.
