Thai bank lending picks up, bad loans edge down

Thai banks increased lending by 2.0% in the second quarter of 2026 compared to the previous year, marking a turnaround after six consecutive quarters of contraction, according to the Bank of Thailand. This two-quarter expansion in commercial bank lending follows a 0.2% rise in the prior quarter. The improvement signals a recovery from sluggish economic growth and high household debt levels.

At the end of June, non-performing loans constituted 2.82% of outstanding credit, down slightly from 2.85% at the end of March. Banks have been working to manage bad debt more effectively. However, the banking system remains stable, but uncertainty surrounding the Middle East conflict and the uneven economic recovery puts pressure on debt-servicing capacity, the central bank noted.

Lending is anticipated to continue growing in the third quarter, driven by demand from large firms for working capital and raw materials, according to Suchot Piamchol, a senior director at the Bank of Thailand. Non-performing loans may rise among vulnerable sectors like construction and real estate, he added.

The household debt-to-GDP ratio remained steady at 85.9% of GDP at the end of March, despite slower economic growth. This is attributed to declining debt levels and banks selling distressed debt. The detailed report will be published next month. Household debt reached 16.4 trillion baht at the end of March, the highest in Asia.