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The Financial Services Commission (FSC) will double interest rates to 3 to 4 percent for the planned second wave of emergency loan program worth 10 trillion won.
The loan is intended to support small businesses hampered by the novel coronavirus outbreak.
The increased interest rate is meant to discourage improper use of the loans.
According to an official, the low-interest rate in the previous loan program triggered excessive demand as it tempted some business operators to allocate funding for non-business purposes.
Six commercial banks, namely Shinhan Bank, KB Kookmin Bank, Woori Bank, Hana Bank, Industrial Bank of Korea, and NH Bank, were tasked to extend the loans.
Business owners who have already availed of emergency funds in March are not qualified to apply.
Loan approvals will take place on May 25, according to the FSC, South Korea's top financial watchdog.
The second round of loans was necessary as the previous loan program ran out of funding due to soaring demand.
The previous program only allowed business operators with high credit grades between 1 and 3 to avail of funding.
