Demand for bank loans from businesses and households is expected to remain firm in the third quarter of 2025, supported by slowing inflation, anticipated interest rate cuts and steady credit standards among banks, a Bangko Sentral ng Pilipinas (BSP) economist said.
“Our analysis suggests that loan demand will remain measured yet firm, supported by easing policy rates, benign inflation, and a resilient banking sector,” BSP Assistant Governor Margarita Debuque-Gonzales said in an interview over the weekend.
Gonzales said Philippine banks have largely kept their credit standards — including income requirements, collateral rules, loan size, interest rates and repayment terms — unchanged in recent months.
The BSP on Friday (July 25) released the results of its Q2 2025 Senior Bank Loan Officers’ Survey (SLOS), which has monitored trends in bank lending behavior since 2009. The SLOS tracks both demand and supply for loans across the banking system, based on inputs from senior loan officers.
Credit standards unchanged
Using the survey’s modal approach — which tracks the majority response — 91.1 percent of respondent banks said they intend to keep credit standards unchanged for business loans in the third quarter, up from 82.1 percent in the preceding quarter.
For household loans, 85 percent of banks reported no plans to adjust lending criteria, also higher than the 82.5 percent recorded in Q2.
The BSP also uses a diffusion index (DI) to track net tightening or easing in credit standards. A positive DI indicates net tightening; a negative DI indicates net easing.
Based on DI results, net tightening was recorded at 5.4 percent for business loans and 5 percent for household loans — significantly lower than the 14.3 percent and 12.5 percent respectively seen in the previous quarter.
“The diffusion index may appear predictable, but it reflects the steady nature of credit demand rather than a lack of momentum,” Gonzales explained.
Steady loan appetite
Despite the government’s revised 2025 growth forecast of 5.5–6.5 percent (down from 6–6.5 percent), the BSP sees no sharp drop in lending appetite.
“The downgraded growth outlook reflects softer external demand and geopolitical risks. But domestic consumption, remittances, and infrastructure spending remain solid — all of which continue to drive credit demand,” Gonzales said.
Unless geopolitical risks escalate significantly, she said, credit demand is expected to track the economy’s moderate but steady growth trajectory.
The BSP is projecting at least 50 basis points in cumulative policy rate cuts this year, which would bring the benchmark rate to below 5 percent by end-2025 — further supporting borrowing activity.
Loan demand steady
The survey showed 75 percent of banks reported steady demand for business loans in Q2, while 5.4 percent observed lower demand, and 19.6 percent saw increased demand.
For Q3, 71.4 percent of banks expect demand for business loans to remain stable, with 26.8 percent anticipating stronger demand and only 1.8 percent foreseeing a decline.
For household loans, 77.5 percent of banks said demand was unchanged in Q2, while 10 percent noted a decline and 12.5 percent cited an increase.
Looking ahead, 72.5 percent of banks expect demand to stay steady through the third quarter, and notably, no respondent expects a drop in household credit appetite.
The BSP said it conducts the SLOS quarterly to better assess bank lending behavior — a key gauge of domestic credit growth — and to monitor shifts in banks’ internal lending guidelines, whether liberal or conservative.
