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South Korea's money supply rose for the second consecutive month in May, driven by increased investment in funds as the stock market rebounded, central bank data showed on Tuesday. 

The country's M2, a key gauge of the money supply, stood at 4,279.5 trillion won (US$3.09 trillion) in May, up 1 percent from a month earlier, according to the preliminary data from the Bank of Korea (BOK).

It marked the second consecutive monthly increase. The M2 is a measure of the money supply that counts cash, demand deposits and other easily convertible financial instruments, reports Yonhap news agency.

Of the total, securities rose by 16.4 trillion won, money trusts by 8.3 trillion won, and savings deposits with free withdrawals by 6.1 trillion won.

"As the stock market showed signs of recovery, beneficiary certificates, particularly those tied to equity-type securities, increased," a BOK official said. "The rise in savings deposits with free withdrawals was driven by inflows of funds earmarked for upcoming fiscal spending by local governments."

Demand deposits, however, fell by 2.3 trillion won as some idle funds were withdrawn for investment amid the asset market recovery, the official added.

Meanwhile, South Korean banks are expected to tighten their criteria on extending loans to households in the third quarter amid the government's efforts to rein in surging household debt and home prices, a survey by the central bank showed on Tuesday.

The index gauging banks' attitude toward lending stood at minus 17 for the July-September period, down 4 points from the previous quarter, according to the poll of 203 financial institutions conducted by the Bank of Korea (BOK).

A reading below zero means that a majority of lenders will tighten lending standards.

"Lending standards for both mortgage and unsecured loans are expected to tighten, as tighter debt-to-service ratio (DSR) rules took effect in July and additional household debt management measures were implemented on June 28," a BOK official said.