Bad loans approach P600 billion, despite the nonperforming loan ratio remaining steady at 3.35%.
This was the latest data by the Bangko Sentral ng Pilipinas (BSP), reporting that bad-loan ratio held steady in August. But while this may seem good for Philippine banks, it hints at a deeper issue affecting Filipino borrowers today.
What does the 3.35% nonperforming loan ratio actually mean?
In simple terms, 3.35% of the total value of debt held by Philippine banks was classified as nonperforming, generally meaning principal or interest payments have remained unpaid for at least 90 days. These include consumer loans such as credit card debt, car and housing, as well as debt taken out by businesses.
But here’s the catch: the ratio looks relatively stable not because the amount of bad debt has fallen, but because banks are lending more.
Bad loans increased from P550.1 billion in August 2025 to P596.3 billion in August this year, or 8.4%. Over the same period, banks’ overall loan portfolio grew even faster-by 13.2% to P17.78 trillion. In other words, bad debt grew, but total lending grew faster, keeping the percentage relatively low.
Banks still have a sizable cushion against these losses, with P555.6 billion set aside as allowances for potential credit losses. However, if repayment problems continue to worsen, banks could become more cautious about extending credit.
This could mean stricter loan approval criteria, higher borrowing costs, smaller approved loan amounts, or tougher collateral requirements. Borrowing money from the bank to purchase your dream home or that car you’ve always wanted could therefore become more challenging if the trend worsens.
Why are people struggling with their debt?
Economists have linked repayment pressures to inflation, slower economic growth, and higher borrowing costs. Inflation has also eroded household purchasing power, while high levels of debt and the cost of servicing those debts can eat into disposable income and limit how much consumers can afford to borrow later.
Among consumer loans reported by the BSP, housing loans accounted for the largest amount of nonperforming debt as of June 2026 at about P76 billion, followed by credit card receivables at nearly P69 billion. Motorcycle loans, meanwhile, had the highest NPL rate at 15.64%.
So, what now?
Whether or not banks eventually tighten their requirements, Filipinos need to carefully assess how much debt they can genuinely afford. This is true whether a loan is being used to purchase a new asset, fund a business, or cover household expenses.