Loans extended to companies in South Korea grew at the fastest pace in 3 and a half years in the first quarter compared with the previous three-month period, driven by strong demand from the service sector, central bank data showed on Monday.

Outstanding loans to local companies reached 2,061.8 trillion won (US$1.33 trillion) as of end-March, up 35.6 trillion won from the fourth quarter of 2025, according to data from the Bank of Korea (BOK).

The increase marked the largest on-quarter gain since the third quarter of 2022, when corporate loans increased 56.7 trillion won, reports Yonhap news agency.

It also recorded an acceleration from the previous quarter, when loans expanded by 8.5 trillion won.

The BOK said banks have increased corporate loans in the first quarter as the economy is showing signs of recovery.

By sector, loans to manufacturing firms rose by 11.1 trillion won from three months earlier to 513.8 trillion won.

Loans in the service sector surged by 24 trillion won to 1,317.7 trillion won on increased loans to financial and retail sectors.

Regarding the purpose of the loans, operating funds increased by 26.2 trillion won in the first quarter, following a 1.9 trillion-won gain in the fourth quarter.

Facility investment loans advanced by 9.4 trillion won, picking up the pace from a 6.6 trillion-won increase in the previous quarter, the BOK data showed.

Meanwhile, South Korean stocks were trading more than 6 percent lower late on Monday morning as investors dumped market heavyweights amid a tech slump sparked by a U.S. chip slide and concerns over a possible hawkish pivot of the U.S. Federal Reserve. The local currency was trading sharply lower against the U.S. dollar after opening at a 17-year low.

After falling nearly 9 percent, the benchmark Korea Composite Stock Price Index (KOSPI) had plunged 492.8 points, or 6.04 percent, to 7,667.79.