Lending by Thai banks rose 2.0% in the second quarter of 2026 from a year earlier, following a 0.2% rise in the previous quarter, the Bank of Thailand said on Tuesday.

The two consecutive quarters of expansion in commercial bank lending mark a turnaround from six straight quarters of contraction, which reflected sluggishness in the economy and high household debt levels.

Non-performing loans stood at 2.82% of outstanding credit at the end of June, down slightly from 2.85% at the end of March, as banks accelerated efforts to manage bad debt, the central bank said.

The banking system remained stable, but uncertainty surrounding the conflict in the Middle East and the uneven recovery of the economy weighed on debt-servicing capacity, it said.

Lending is expected to continue expanding in the third quarter, driven by demand from large firms for working capital and for raw materials, Suchot Piamchol, senior director for modelling supervision and risk assessment at the BoT, said at a briefing.

Non-performing loans could increase among vulnerable sectors, such as construction and real estate businesses, he said.

The household debt-to-GDP ratio in the second quarter did not show signs of rising, despite slower economic growth, as debt levels declined and banks continued to sell distressed debt, he said. The data will be released next month.

Household debt stood at 16.4 trillion baht at the end of March, or 85.9% of GDP, among the highest levels in Asia.