September 1, 2019 / 3:09 AM / 16 days ago

South Korea central bank frees more cheap funds for smaller firms

FILE PHOTO: The logo of the Bank of Korea is seen on the top of its building in Seoul, South Korea, March 8, 2016. REUTERS/Kim Hong-Ji/File Photo

SEOUL (Reuters) - South Korea’s central bank said on Sunday it would make up to 5 trillion won ($4.12 billion) of extremely cheap funds newly available for local banks that increase lending to smaller firms hit by the economic slowdown.

Banks can use the funds at an interest rate of 0.5% per year, on the basis of their actual amount of lending to smaller companies for purposes ranging from capital investment and additional employment, the Bank of Korea said in a statement.

It is much lower than an actual lending rate of close to 4% that banks actually charge for lending to smaller companies.

The central bank said it was not creating a new lending facility but would make the additional funds available by adjusting ceilings of existing programs.

Reporting by Choonsik Yoo; Editing by Rashmi Aich

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