KUALA LUMPUR (Aug 29): Malaysia’s banking sector saw a slight acceleration in overall loan growth in July, driven by a notable increase in business lending and faster corporate bond issuance, according to Bank Negara Malaysia's monthly highlights report on Friday about key developments in the country's economy and financial markets.

This is seen in the 5.5% year-on-year expansion in credit to the private non-financial sector in July, a slightly faster pace than June’s 5.2%, supported by stronger growth in both outstanding business loans and outstanding corporate bonds.

Outstanding business loans rose 4.9% in July, from 4.5% in June, driven by higher loan growth for investment-related purposes among non-small medium enterprises, suggesting companies are actively putting capital to work for growth activities such as expanding production capacity or upgrading technology; small and medium enterprise loan growth also increased, following the higher growth of working capital loans.

Growth in outstanding corporate bonds accelerated to 4.8% in July, from 4.3% in the previous month, further indicating stronger corporate financing activity.

Meanwhile, household loan expansion stayed steady at 6%, reflecting sustained by loan growth across most purposes, from housing to personal financing.

“Gross and net impaired loans ratios remained low at 1.4% and 0.9% respectively, as borrowers’ repayment capacity continued to be sustained,” Bank Negara said.

Loan loss coverage ratio (including regulatory reserves) remained prudent at 128.9% of gross impaired loans in July, compared to 130.4% in June.

Banks' capital also remained strong at 18.4%, the central bank noted, ensuring continued support to credit intermediation and the ability to withstand potential shocks in the economy.

The banking system recorded excess capital buffers of RM143.3 billion as of July 2025.