As total lending caps are lifted, NACF and credit unions resume group loans

[Financial News] Local branches of NACF and credit unions have resumed group lending operations that had been suspended. The move comes after the financial authorities decided to exclude group loans from each lender's household lending cap, creating room for additional loan supply. However, the Korean Federation of Community Credit Cooperatives has yet to set a restart date because it still needs to consult with its supervising ministry, MOIS.
According to the financial sector on the 26th, NACF lifted restrictions on group lending operations starting on the 25th. 
Local NACF branches had stopped offering new interim-payment and relocation-cost loans since March. In addition, from April, NACF branches whose household lending growth for the year exceeded 1% were fully barred from extending household loans to non-members and quasi-members. With those restrictions now lifted, group loans can once again be offered nationwide through NACF branches. 
The National Credit Union Federation of Korea, which had blocked new group loan applications since February, has also reopened lending. According to the federation, it lifted restrictions on new group loan reviews from the 25th and also removed limits on loans arranged through loan brokers and introducers.
Before the Aug. 13 measures were introduced, mutual finance cooperatives sharply reduced household lending as they tightened loan access under the financial authorities' strict oversight. Monthly household loan growth had risen to 310 billion won in February, but fell to 100 billion won in June. In July, total household lending actually declined by 700 billion won from the previous month, marking a reversal into negative growth.
The reason mutual finance cooperatives such as NACF and credit unions have resumed group lending one after another is that the financial authorities decided to fully exclude group loans handled from this month onward from each lender's household lending cap. Since relocation-cost, interim-payment and final-payment loans no longer count against the household lending quota allocated to financial institutions, the need to keep new lending shut has diminished. 
Mutual finance cooperatives are also welcoming the change, as the resumption of group lending opens up a new business channel. Group loans allow lenders to handle large volumes at once, and they can also help attract new customers who may later use other financial products such as deposits and savings accounts.
However, the Korean Federation of Community Credit Cooperatives has not yet resumed group lending. Since February, it has restricted group loans arranged through brokers, and since May it has also suspended new mortgage lending to non-members. Even if borrowers join as members, those who have been members for less than one year are still barred from receiving home-backed loans.
Unlike other mutual finance institutions, the federation must still consult with MOIS, its supervising ministry, before restarting group lending. Although it is internally reviewing a possible resumption after the financial authorities eased total lending controls, related procedures remain, so its restart is expected to lag behind NACF and credit unions.
In particular, the federation's target for household lending growth this year has been set at 0%, limiting its room to expand new lending. An industry official said, "With group loans removed from total lending management, the supply burden has eased, but actual business resumption will still require consultations with relevant authorities."  
[email protected] Seo Ji-yoon Reporter