The Thai banking system remains resilient with robust levels of capital, loan loss provisions, and liquidity. In the first quarter of 2026, overall loan growth in the banking system (licensed banks and their subsidiaries) grew marginally by 0.2% year-on-year. Lending to large corporate resumed expansion, partly reflecting increased working capital demand associated with higher energy and raw material costs among firms directly affected by the war in the Middle East.  Meanwhile, SMEs and consumer loans continued to contract, consistent with heightened credit risks. On loan quality, NPL (Stage 3¹) remained broadly stable at 535.8 billion baht in the first quarter of 2026 with a moderation in new NPL formation across all loan portfolios. The NPL ratio remained stable at 2.85%. Stage 2 loans² declined to 7.0%, mainly reflecting the improvement in risk classification among SICR borrowers, together with the resumption of debt servicing by some borrowers. Commercial banks also continued to provide assistance to borrowers through ongoing debt restructuring, particularly on a pre-emptive basis once early signs of weakening debt-servicing capacity began to emerge. Banking sector profitability declined from the same period last year due to lower net interest income following lending rate cuts in line with monetary policy easing and debt assistance measures under the ‘Khun Soo, Rao Chuay’ program. In addition, some banks increased provisioning expenses to cushion against uncertainties stemming from the war in the Middle East.

Going forward, amid slowing economic activity and heightened uncertainty related to the Middle East war, vulnerabilities among businesses and households have increased as a result of weaker income and higher cost. These developments could adversely affect debt-servicing capacity and banks’ asset quality. Close monitoring remains warranted with respect to continued tight financial conditions and the debt serviceability of SMEs and households.
In this regard, government debt assistance measures, together with liquidity support provided by financial institutions, have helped alleviate financial strains among vulnerable businesses and households. Meanwhile, the household debt-to-GDP ratio increased slightly in the fourth quarter of 2025, driven by temporary factors, including accelerated spending through credit card borrowing and mortgage lending toward year-end.