KUALA LUMPUR (Oct 31): Private sector credit growth in Malaysia continued to pick up pace in September, underpinned by higher corporate bond issuances and steady business lending.

Year on year, credit to the private non-financial sector expanded 5.9% in September, according to data from Bank Negara Malaysia (BNM) released on Friday, faster than August’s 5.6% increase. Corporate bonds growth accelerated to 7.3% from 5.6% a month earlier.

Outstanding business loans rose 5.4%, driven by increased demand for investment-related financing, particularly from large enterprises. Meanwhile, household loan growth moderated slightly to 5.7% from 5.9% in August amid slower growth in personal use loans.

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 latest indicators suggest that financial institutions are maintaining robust underwriting standards and adequate provisioning buffers, even as credit demand strengthens.

Overall, the banking system continued to record healthy liquidity buffers, with the liquidity coverage ratio improving to 151.1% from 146.8% in August and the loan-to-fund ratio stable at 82.5%.

Gross impaired loans ratio — the proportion of bad debts as a percentage of total loans — was unchanged at 1.4% in September. After factoring in recoveries, net impaired loans were also steady at 0.9%.

The loan loss coverage, including regulatory reserve, stood at a “prudent” 130.1% of gross impaired loans, indicating that banks remain well-capitalised to absorb potential losses.