The Thai banking system remains resilient with robust levels of capital, loan loss provisions, and liquidity. In the fourth quarter of 2025, overall loan growth in the banking system (licensed banks and their subsidiaries) contracted by 1.1% year-on-year, broadly in line with the previous quarter. The decline was driven by continued contractions in SMEs and consumer loans, reflecting heightened credit risks. Meanwhile, lending to large corporates recorded a slight contraction, partly due to weaker loan demands. Overall loan quality (NPL or Stage 3)¹ declined to 536.0 billion baht in the fourth quarter of 2025 due to debt repayments along with banks’ loan portfolio management. As a result, the NPL ratio decreased to 2.84%. Stage 2 loans² decreased to 7.07%, primarily reflecting repayments under restructured loan arrangements. In addition, commercial banks continued to provide assistance to borrowers. Banking sector profitability in 2025 declined from the previous year, mainly attributable to lower net interest income following lending rate cuts in line with policy rate reductions and banks’ adjustments under the ‘Khun Soo, Rao Chuay’ program. The decline was compounded by loan contraction, reflecting both weaker loan demand and elevated borrower credit risks amid a slowing economic environment.

Going forward, close monitoring remains warranted with respect to continued tight financial conditions and the debt serviceability of SMEs and households in an environment of below-potential and uneven economic growth, underpinned by structural challenges that continue to weigh on income prospects. Targeted financial measures have helped alleviate debt burdens for vulnerable businesses and households. Meanwhile, the household debt-to-GDP ratio in the third quarter of 2025 remained unchanged from the previous quarter, while household lending contracted at a similar pace.

^{[1] Gross non-performing loans (NPL or stage 3)
[2] The ratio of loans with a significant increase in credit risk (SICR or stage 2)}