Banks can use the funds at an interest rate of 0.5pc 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 4pc 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 programmes.