KUALA LUMPUR — Credit to Malaysia’s private non‑financial sector grew by 5.5 per cent in January 2026, slightly higher than the 5.4 per cent growth recorded in December 2025, reflecting broader activity in outstanding corporate bonds and stable lending across both business and household segments, according to the latest monthly highlights released by Bank Negara Malaysia (BNM).
The central bank noted that the acceleration in private sector credit was mainly driven by a higher growth of outstanding corporate bonds, which rose by 7.6 per cent last month, compared with 6.9 per cent in December. The growth in outstanding loans remained steady at 5 per cent, underscoring ongoing demand for financing from various sectors of the economy.
Business and Household Lending Trends
Business loans expanded by four per cent, supported by stronger growth in investment‑related financing, particularly among larger enterprises. Loans extended to small and medium enterprises (SMEs) remained broadly steady, according to the central bank. Meanwhile, household loan growth held firm at 5.6 per cent, mirroring the pace seen in the previous month and reflecting ongoing borrowing activity across housing, consumer and personal purposes.
Banking System Health and Stability
Bank Negara highlighted that the capital position of Malaysia’s banking system remained strong, with a capital adequacy ratio of 18.1 per cent as of January 2026, providing robust buffers to support continued credit intermediation and absorb unexpected losses. The system also recorded excess capital buffers of RM139.6 billion, supporting financial resilience.
Asset quality metrics remained sound, with both gross and net impaired loans ratios stable at 1.4 per cent and 0.9 per cent, respectively. The loan loss coverage ratio — which includes regulatory reserves — was sufficient to cover around 125.9 per cent of gross impaired loans, slightly lower than the 127.2 per cent recorded in December 2025.
Market Sentiment and External Factors
In addition to lending dynamics, Bank Negara acknowledged that domestic and external developments influenced local financial markets. Weaker sentiment surrounding the US dollar due to geopolitical and tariff uncertainties supported foreign portfolio inflows into Malaysian markets, alongside confidence in the country’s economic fundamentals and favourable outlook.
Amid this backdrop, the ringgit appreciated by 2.9 per cent against the US dollar during January, while the FTSE Bursa Malaysia KLCI enjoyed gains of approximately 3.6 per cent over the same period. Despite increased issuance of Malaysian Government Securities (MGS), yields remained broadly stable as domestic demand absorbed the additional supply.
The inflation environment in January saw headline and core inflation stable at 1.6 per cent and 2.3 per cent, respectively. Price increases were noted in jewellery and watches, while softer declines in electricity prices and lower inflation in petrol and selected services offset some upward pressure.
The sustained credit growth signals ongoing confidence among businesses and households in borrowing conditions and aligns with broader economic stability as Malaysia progresses into 2026.
