KUALA LUMPUR (Aug 30): Malaysia’s gross loan growth remained steady in July, as expansion in business borrowings offset a slowdown in corporate bonds, official data from the central bank showed on Friday.

Credit to the private non-financial sector expanded 5.5% year-on-year in July, the same pace as in June, Bank Negara Malaysia (BNM) said in a statement. Outstanding business loans grew 6% in July, versus 5.7% in June.

Growth in business loans was supported by demand for working capital, particularly across the manufacturing and services sectors. Investment-related loan growth also remained “forthcoming”, the central bank noted.

In July, outstanding household loans grew 6.2%, the same pace as in June, supported by steady expansion in loans for the purchase of housing and cars. “Loan applications were higher, reflecting the demand for financing among households,” BNM said.

Outstanding corporate bonds meanwhile grew 3%, moderating from a 3.4% increase in June.

The data covers loans to households and non-financial corporations from the banking system and development financial institutions, as well as corporate bonds issued by non-financial corporations, including short-term papers.

“The banking system's resilience continues to be underpinned by sound asset quality,” BNM said, as the overall gross impaired loan ratio — debts deemed unrecoverable as a percentage of total loans — was stable at 1.6% in July. On a net basis, impaired loans were also steady at 1% in July.

Total provisions stood at RM31.73 billion in July, compared with RM31.9 billion in June.

Banks’ liquidity and funding positions remained supportive of intermediation activities, BNM said, even as the liquidity coverage ratio slipped to 150.8% in July from 155.1% in June, while the aggregate loan-to-fund ratio inched up to 83% from 82.8% a month earlier.

M3, the broadest gauge of the country’s money supply including currency in circulation, fixed deposits and foreign currency deposits, expanded 5.3% in July, a tad faster than June’s 5.2% pace.