SEOUL, March 31 (Yonhap) -- The head of South Korea's recently-launched debt restructuring fund said Sunday that it will buy debts held by financial companies just one time, shrugging off worries that repeated help could lead to moral hazards among delinquent borrowers.
On Friday, the government launched the National Happiness Fund in order to buy debts held by local financial companies, a move aimed at pushing for debt write-offs or debt rescheduling for delinquent borrowers.
Eligible for the benefits are those whose debts are less than 100 million won (US$90,009) and more than six months behind payments as of February. The fund has made an agreement with about 4,000 financial companies to cooperate in the debt restructuring efforts.
Bahk Byong-won, the head of the fund, told Yonhap that the fund will not be able to buy debts from them more than once under the current circumstances.
Bahk explained that the debt purchases will take at least two to three months to deal with contracts and other basic processes, and it is also required to complete buying debts within 12 months of the agreement going into effect.
Given that, he said it would be "technically" difficult to take over the debts from the companies more than once.
His remarks are in response to worries that repeated help could cause moral lapses among delinquent borrowers. The government estimates around 324,000 people are eligible for the benefits from the fund.
The fund is one of President Park Geun-hye's campaign pledges to save delinquent borrowers amid worries that rising household debts could cause financial instability and halt the country's economic growth.
The country's household debt has reached a record 959.4 trillion won as of end-2012, central bank data showed.
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