Thai household credit hits alarming 100 bn baht in Q2 as bad-loan fears deepen

Bangkok Business News: Thailand’s banking system is bracing for turbulence as the latest figures reveal that household credit surged past 100 billion baht in the second quarter, pushing debt-service burdens higher and raising red flags for lenders and policymakers alike. This Bangkok Business News report highlights how consumer borrowing is creeping towards unsustainable levels and outlines growing concerns over the stability of the financial sector.

Household loans over 100 billion baht in Q2 pose a new warning sign for Thai banks.
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Record-high borrowing drives risk higher

In Q2 2025 household credit reached roughly 102 billion baht, reflecting a strong pace of loan growth despite a sluggish macro-economic backdrop. Analysts say the rise has been fuelled by ultra-low borrowing costs and an uptick in consumption-driven borrowing among middle-income groups. While a surge in credit might typically herald robust domestic demand, banks are warning that the quality of these loans is being tested by decelerating income growth and rising household liabilities.

Adding to the unease, lenders have reported a rise in the proportion of borrowers classified as “special mention” (SM) or worse — signalling increased vulnerability to non-performing loan (NPL) status. The combination of heavier debt loads and a difficult operating environment has prompted some institutions to raise provisions and tighten underwriting standards.

Debt burden climbs amid economic strain

With Thailand’s economic recovery sluggish, consumers are under mounting pressure. Rising living costs, stagnant wage growth and volatile export performance are squeezing household budgets. As borrowing grows, the ratio of debt-to-income for many households is inching into risky territory. Although current NPL ratios remain contained, banks warn that a further slowdown in growth or interest-rate shock could trigger a cascade of defaults.

Regulators are watching closely. The Bank of Thailand (BOT) has already instituted stricter supervision of the hire-purchase and leasing industry — which accounts for nearly 10 per cent of household debt — to reduce systemic risk. Moreover, the BOT has emphasised the need for banks to reinforce their loss-absorbing capacity ahead of any uptick in bad loans. One senior banking executive summed it up: “Borrowing is still easy, but the pain may come when repayment becomes tougher.”

Lenders brace for tougher credit environment

In Q2 the combined profit of the 11 major Thai banks dropped to 66.2 billion baht as provisions for bad debt increased sharply.The message from the sector is clear: loan growth alone will not support profitability unless asset-quality management improves. In response, several banks are tightening criteria for consumer lending, ramping up debt-counselling services and exploring more active restructuring programmes for risky accounts.

Implications for the Thai economy

As household debt rebounds, the policy implications are substantial. Elevated leverage constrains consumers’ ability to spend, leaving the broader economy exposed if credit conditions deteriorate or interest rates rise. The synchronization of credit stress across consumer, SME and corporate segments could increase contagion risk. Banks may curtail lending to protect balance sheets, which in turn could dampen investment and growth. In short, unchecked credit expansion may prove a double-edge sword.

While the current environment hasn’t yet triggered a full-blown credit crisis, the signs of strain are mounting. The interplay of rising debt burdens, economic fragility and tightening bank conditions demands close attention.

In summary this surge in household credit, though indicative of consumer momentum, carries significant latent risk. Should conditions deteriorate—via an income shock, interest-rate rise or external slowdown—Thai households could find their debt traps tightening. The resilience of financial institutions and the broader economy may thus hinge on how well banks manage the hidden vulnerabilities today.

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