The quality of loans in the Philippine banking system improved slightly toward the end of 2025, with the non‑performing loan (NPL) ratio — often called the bad‑loan ratio — dropping to 3.32 percent as of November. This marked a minor decrease from 3.33 percent in October and was lower than the 3.54 percent recorded in the same month a year earlier, according to data from the Bangko Sentral ng Pilipinas (BSP).
The easing in the bad‑loan ratio was mainly driven by lower interest rates and faster loan growth, which helped many borrowers stay current on their repayments. Rizal Commercial Banking Corp. Chief Economist Michael Ricafort noted that policy‑rate cuts and reduced reserve requirements boosted banks’ liquidity and made it easier for borrowers to meet obligations — which in turn helped keep the ratio down.
Despite the ratio’s improvement, the total value of non‑performing loans increased in nominal terms, climbing to about ₱544.9 billion at the end of November as the overall size of bank loan portfolios expanded.
- A lower NPL ratio signals improved asset quality and healthier loan performance among borrowers, which can strengthen confidence in the banking system.
- Easing loan defaults may give banks more room to expand lending, supporting economic activity and credit growth.
- Continued monitoring is important, as nominal bad‑loan balances still rose even while the ratio fell.