Thai bank lending picks up, bad loans edge down

In the second quarter of 2026, lending by Thai banks increased by 2.0% compared to the previous year, following a 0.2% rise in the prior quarter. This marks a turnaround from six consecutive quarters of contraction, driven by a sluggish economy and high household debt levels. Non-performing loans, which are those that are unlikely to be repaid, stood at 2.82% of outstanding credit at the end of June, a slight decrease from 2.85% at the end of March.

Banks are working to manage bad debt more effectively. While the banking system remains stable, uncertainty surrounding the Middle East conflict and uneven economic recovery has put pressure on debt-servicing capacity. The central bank expects lending to continue expanding in the third quarter, fueled by demand from large firms for working capital and raw materials.

However, non-performing loans may rise among vulnerable sectors such as construction and real estate. The household debt-to-GDP ratio remained stable at 85.9% of GDP, despite slower economic growth, as debt levels declined and banks sold distressed debt. The data will be released next month. Household debt totaled 16.4 trillion baht at the end of March, among the highest levels in Asia.