More than half of the household credit loans newly extended by OK Savings Bank carried annual interest rates above 16%, drawing criticism that mid- to low-credit borrowers face a relatively heavier interest burden because the lender applies higher rates than other large savings banks even to borrowers in the same credit score range.
Loans priced above 16% accounted for 50.76% of the household credit loans OK Savings Bank newly extended in July, according to financial industry sources on the 18th. That means more than one in every two borrowers who took out a new credit loan at the bank was charged an annual rate above 16%.
Among the 10 largest savings banks by assets, only two — Welcome Savings Bank and OK Savings Bank — had more than half of their new loans priced above 16%. Welcome Savings Bank ranked highest at 51.42%, followed by OK Savings Bank. The ratio is more than three times that of SBI Savings Bank (14.28%), the industry's largest lender by assets.
OK Savings Bank also stood relatively high on overall average lending rates. The average rate on its new household credit loans in July was 15.78%. That was below Welcome Savings Bank (16.75%) but above SBI Savings Bank (14.72%) and Korea Investment Savings Bank (12.39%).
The rates reflect OK Savings Bank's relatively high spread. A lending spread incorporates funding costs, the operating costs of extending and managing loans, expenses tied to a borrower's credit risk and the margin a financial company seeks to secure. Even when the same base rate applies, a higher spread means a higher rate for the borrower. OK Savings Bank's spread stood at 12.53%, above SBI Savings Bank (11.88%) and Korea Investment Savings Bank (9.47%).
Rate gaps also emerged among borrowers with similar credit scores. In the 601-700 score band, OK Savings Bank's average rate was 1.67 percentage points higher than SBI Savings Bank's. In the 501-600 band, it charged 18.24%, or 3.42 percentage points more than SBI's 14.82%.
Industry watchers say savings banks need to ease the interest burden on vulnerable borrowers, given their role in broadening access to regulated finance for mid- to low-credit borrowers. "Considering the characteristics of savings bank borrowers, rates above 16% will only add to their repayment burden," one financial industry official said. "There is a need to consider an appropriate rate level to protect vulnerable borrowers."
