NBC turns down lenders’ request to extend loan forbearance

NBC turns down lenders’ request to extend loan forbearance

By blocking restructurings, the NBC is pushing lenders to address bad loans immediately. The policy forces financial institutions to align their capital levels and loan-loss provisions with actual credit risks.

The National Bank of Cambodia (NBC) has turned down a request from banks and microfinance institutions to extend preferential loan restructuring measures, despite rising debt impairments.

However, lenders maintained that continued relief would help borrowers recover from economic shocks.

Several Japanese media outlets reported on September 1 that the NBC had declined a plea from commercial lenders to prolong special loan-forbearance measures through the end of 2026, saying further relief could risk masking underlying credit problems and ultimately undermine economic growth.

The Tokyo Tribune reported that the NBC informed financial institutions that it would not approve an extension of the temporary forbearance framework, which gave lenders greater flexibility over loan classification and provisioning. Lenders had requested that the relaxation of rules be extended until December 31, 2026, according to industry sources.

Regulators framed the refusal as a preventive step to avoid prolonged regulatory forbearance that could delay recognition of non-performing loans. The central bank emphasised that transparency in asset quality is essential for resilient credit allocation and sustained economic growth, the Japanese English newspapers said.

According to Nikkei Asia, Rath Sophoan, Chairman of the Association of Banks in Cambodia (ABC), said financial institutions had requested only a temporary extension of the measures to help the sector respond to current economic challenges.

The request did not mean lenders were seeking unconditional permission to restructure loans, but a short-term extension of the relief measures could give financial institutions greater flexibility in managing their loan portfolios and help customers struggling to repay their loans, he added.

The development comes as financial institutions continue to face pressure from rising non-performing loans (NPLs) and a large volume of restructured credit.

Radio France Internationale based in Cambodia (RFI Khmer) reported on Tuesday that the banking sector’s gross NPL ratio rose to 9.6 percent in the first six months of this year, up from 8.3 percent in 2025.

Loan restructuring allows lenders to modify repayment terms for borrowers facing financial difficulties, giving them more time to repay and avoid default. However, prolonged regulatory forbearance can delay recognition of deteriorating loan quality and reduce the immediate need for additional provisions.

The issue is particularly significant for Cambodia’s financial sector, where banks and microfinance institutions have accumulated substantial restructured loan portfolios. Rising loan impairment has put pressure on lenders’ asset quality and profitability, while tighter credit conditions could affect businesses and households seeking new financing.

ABC and the Cambodia Microfinance Association (CMA) have previously worked with the NBC on measures to support borrowers experiencing financial difficulties. However, no publicly available statement has confirmed whether either association specifically submitted the latest request to extend the preferential measures.

Speaking to Khmer Times, policy analyst at the Royal Academy of Cambodia Sam Seun said that the NBC should reconsider its decision and seek a balanced approach that addresses both the central bank’s concerns over credit risks and borrowers’ ongoing financial difficulties.

“Even though the Covid-19 pandemic is over, Cambodia’s economy has yet to fully return to its pre-pandemic level,” he said.

Seun noted that the economic challenges were compounded by a decline in international tourist arrivals, with the latest figures showing only 2 million visitors, while the online scam industry has also damaged Cambodia’s reputation and affected business activity and income.

He added that Cambodia’s economic outlook remains uncertain as US tariff policies continue to change rapidly, while border tensions with Thailand have also disrupted economic activity and weakened consumer spending.

“Since the NBC has implemented preferential loan restructuring measures for several years, it should not end them during this difficult period. Ending the measures now may not be appropriate given the current economic situation.”

Seun stressed that he did not support borrowers who deliberately refuse to repay their loans, but said that the central bank should consider a compromise because the decision could affect a large number of borrowers, particularly those in rural areas who remain dependent on bank and microfinance loans.

Rather than maintaining a blanket extension, he suggested that the NBC could assess borrowers’ actual financial conditions and repayment capacity before deciding whether further restructuring relief is warranted. He also urged the NBC to work with relevant institutions to conduct a survey of household and business incomes to determine whether borrowers’ revenues have genuinely recovered.

“Based on the findings, the NBC could then take a decision on whether certain borrowers or sectors still require temporary restructuring support,” Seun added.

khmertimeskh