Seoul focuses on loan quality after curbs on household debt fail

Seoul

SOUTH Korea's government has effectively abandoned its goal to cut one of the world's highest levels of household debt, and will instead try to curb riskier types of loans as a weak economy forces it to focus on growth, officials have told Reuters.

But with the average household already spending more than one-third of disposable income on repayments and the sector's debts reaching US$1 trillion, the government risks creating a bigger drag on economic growth once interest rates rise again.

Steps likely to be announced next week are aimed at cutting the share of "bullet" loans - where a lump sum is repayable at maturity - and will require lenders to strengthen screening of applications, one government source sa…