Thai Banks’ Bad Loans Dip Slightly

Why It Matters

Persistently weak lending and elevated household debt pressure Thailand’s growth outlook, prompting the central bank to consider policy tweaks to sustain credit flow and stabilize the property sector.

Key Takeaways

• NPL ratio fell to 2.84% from 2.94%.
• Bank lending contracted six quarters consecutively.
• Household debt ratio at 86.8% of GDP.
• GDP growth slowed to 2.4% YoY.
• BoT may extend mortgage LTV relief.

Pulse Analysis

The modest decline in non‑performing loans (NPLs) reflects improved asset quality, yet it masks a deeper credit squeeze across Thailand’s banking system. Six consecutive quarters of loan contraction signal that banks are tightening standards amid heightened risk assessments, especially for small‑and‑medium enterprises and consumer borrowers. This pullback curtails the sector’s ability to fuel domestic demand, a concern given the country’s reliance on credit‑driven growth.

Household debt, now 86.8% of GDP, ranks among the highest in Asia and underscores the fragility of consumer finances. Elevated leverage limits disposable income, dampening consumption and heightening vulnerability to interest‑rate shifts. The property market, already strained, could face further stress without supportive financing. In response, the Bank of Thailand is weighing an extension of relaxed loan‑to‑value (LTV) limits for mortgages beyond the June 30 deadline, a move aimed at preventing a sharp downturn in housing activity.

Looking ahead, the central bank’s policy stance will be pivotal. If credit conditions remain restrictive, GDP growth may falter further, pressuring investors and foreign capital flows. Conversely, calibrated easing—such as extended LTV relief or targeted liquidity measures—could revive lending, bolster consumer spending, and stabilize the real‑estate sector. Regional peers watch Thailand’s approach closely, as its balance between financial stability and growth support offers a template for other high‑debt economies.

Thai banks’ bad loans dip slightly

But lending overall has now contracted for six consecutive quarters · 17 Feb 2026 at 18:14

Writer: Reuters

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Thai banks’ non‑performing loans stood at 2.84 % of outstanding credit at the end of December, down from 2.94 % at the end of September, the central bank said on Tuesday.

Bank lending dropped 1.1 % in the fourth quarter of 2025 from a year earlier, after a decline of 1 % in the previous quarter. The Bank of Thailand attributed the decline to reduced lending to smaller businesses and consumers because of high credit risks.

Despite the fall‑off in lending, which has reached six consecutive quarters, the central bank said the banking system remained strong, with high capital, reserves and liquidity.

The ratio of household debt to gross domestic product (GDP) was 86.8 % at the end of the third quarter of 2025, among the highest levels in Asia. The total amount of household debt stood at 16.3 trillion baht.

The debt ratio is expected to have dropped in the fourth quarter due to stronger GDP growth, BoT assistant governor Somchai Lertlarpwasin said. The fourth‑quarter data will be released at the end of March.

Visitors review financial products on offer at Money Expo 2024 in Bangkok.

The economy grew at an annual rate of 2.5 % in the final quarter of 2025, above expectations. But full‑year expansion of 2.4 % was down from 2.9 % the year before.

Mr Somchai also said the central bank was ready to consider extending relaxed loan‑to‑value rules for mortgages, which are set to end on 30 June, to support the struggling property market.