Coverage: Q2 2025 · Information to 10 September 2025
Originally Published as TGB Premium Intelligence
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TGB Quarterly Regional Banking Monitor · 10 September 2025
Central banks across Asia Pacific eased policy between April and August 2025 while the Bank of Japan held at around 0.5%, and banking systems entered the second half with solid capital but, in most cases, thinner margins.
The desk view
Easing spread across Asia Pacific in the second quarter of 2025. India cut its repo rate by 50bp to 5.50% in June, Korea took its Base Rate to 2.50% in May, Australia moved to 3.60% by August and Bank Indonesia reached 5.00% after 100bp of cuts since September 2024. The Bank of Japan was the exception, holding its call-rate target at around 0.5% while tapering bond purchases. Banks broadly kept their buffers: China's commercial banks lifted capital adequacy to 15.58% and Indian banks' capital ratio reached a record 17.3%. The pressure is on margins, with net interest margins lower in Korea, Thailand and at DBS. The asset-quality watch points are Thai SME and housing loans and Korean household debt.
The regional picture
Where central banks in the region moved during the quarter, they eased. The Reserve Bank of Australia cut its cash rate by 25bp to 3.85% on 20 May 2025, and the Bank of Korea lowered its Base Rate from 2.75% to 2.50% on 29 May. In May the People's Bank of China lowered the 7-day reverse repo rate from 1.5% to 1.4% and cut the reserve requirement ratio by 0.5 percentage point, releasing about RMB1 trillion of long-term liquidity. Bank Negara Malaysia cut its statutory reserve requirement from 2% to 1% with effect from 16 May 2025, and on 6 June the Reserve Bank of India cut its repo rate by 50bp to 5.50%.
The easing continued into the third quarter. Bank Negara Malaysia cut its Overnight Policy Rate by 25bp to 2.75% on 9 July, the Reserve Bank of Australia cut again to 3.60% on 12 August, and the Bank of Thailand lowered its rate to 1.50% on 13 August. Bank Indonesia cut the BI-Rate by 25bp to 5.00% at its meeting of 19-20 August 2025, taking its reductions since September 2024 to 100bp.
The Bank of Japan stood apart. It kept its guideline for the overnight call rate at around 0.5% by unanimous votes on 1 May, 17 June and 31 July 2025. India held in August with a neutral stance, while Korea held in July and August but said it would maintain its rate cut stance.
Policy moves, April to August 2025
| Economy | Policy instrument | Decisions between April and August 2025 | Level after the latest move |
|---|---|---|---|
| Australia | Cash rate target | Cut 25bp on 20 May and 12 August | 3.60% |
| China | 7-day reverse repo rate | Cut in May; reserve requirement ratio cut 0.5pp | 1.4% |
| Japan | Uncollateralised overnight call rate | Held on 1 May, 17 June and 31 July | Around 0.5% |
| India | Policy repo rate | Cut 50bp on 6 June; held on 6 August | 5.50% |
| South Korea | Base Rate | Cut 25bp on 29 May; held on 28 August | 2.50% |
| Indonesia | BI-Rate | Cut 25bp on 20-21 May, again in July and 25bp on 19-20 August; 100bp since September 2024 | 5.00% |
| Thailand | Policy rate | Cut 25bp on 30 April and 13 August | 1.50% |
| Malaysia | Overnight Policy Rate | Cut 25bp on 9 July; reserve requirement cut from 2% to 1% | 2.75% |
| Singapore | S$NEER policy band | Slope reduced slightly in April; maintained in July | No change in July |
Source: Reserve Bank of Australia, Statement by the Monetary Policy Board: Monetary Policy Decision (Media Release 2025-13), 20 May 2025; Reserve Bank of Australia, Statement by the Monetary Policy Board: Monetary Policy Decision (Media Release 2025-22), 12 August 2025; People's Bank of China, 2025年第二季度中国货币政策执行报告 (China Monetary Policy Report, Q2 2025), 15 August 2025; Bank of Japan, Statement on Monetary Policy (1 May 2025), 1 May 2025; Bank of Japan, Statement on Monetary Policy (17 June 2025), 17 June 2025; Bank of Japan, Statement on Monetary Policy (31 July 2025), 31 July 2025; Reserve Bank of India, Monetary Policy Statement, 2025-26: Resolution of the Monetary Policy Committee, June 4 to 6, 2025 (Press Release 2025-2026/489), 6 June 2025; Reserve Bank of India, Monetary Policy Statement, 2025-26: Resolution of the Monetary Policy Committee, August 4 to 6, 2025 (Press Release 2025-2026/841), 6 August 2025; Bank of Korea, Monetary Policy Decision & Opening Remarks to the Press Conference (May 29, 2025), 29 May 2025; Bank of Korea, Monetary Policy Decision & Opening Remarks to the Press Conference (August 28, 2025), 28 August 2025; Bank Indonesia, Monetary Policy Review May 2025, 23 May 2025; Bank Indonesia, Monetary Policy Review August 2025, 22 August 2025; Bank of Thailand, Monetary Policy Committee's Decision 2/2025 (BOT Press Release No. 18/2025), 30 April 2025; Bank of Thailand, Monetary Policy Committee's Decision 4/2025 (BOT Press Release No. 29/2025), 13 August 2025; Bank Negara Malaysia, Monetary Policy Statement (9 July 2025), 9 July 2025; Bank Negara Malaysia, Decrease in the Statutory Reserve Requirement (SRR) Ratio, 8 May 2025; Monetary Authority of Singapore, MAS Monetary Policy Statement - July 2025, 30 July 2025.
Across the eight economies with an interest-rate instrument, only Japan made no cut between April and August 2025.
China: lower rates, stronger capital
The People's Bank of China's May package combined the 10bp policy rate cut with the reserve requirement cut. Transmission was visible by June: the one-year and over-five-year loan prime rates were 3.0% and 3.5%, both 0.45 percentage point lower than a year earlier, and the weighted average rate on new loans was 3.29%. Renminbi loans outstanding reached RMB268.6 trillion at the end of June 2025, up 7.1% year on year.
The National Financial Regulatory Administration's second-quarter data show a system that strengthened its buffers as rates fell. Total banking assets were RMB467.3 trillion at the end of the second quarter of 2025, up 7.9% year on year. The commercial-bank NPL ratio fell 0.02 percentage point on the quarter to 1.49%, and the provision coverage ratio rose 3.84 percentage points to 211.97%. Capital adequacy rose 0.30 percentage point to 15.58% and the core tier 1 ratio rose 0.24 percentage point to 10.93%. The liquidity coverage ratio of commercial banks with assets of RMB200 billion or more rose 3.05 percentage points to 149.25%.
Commercial banks earned cumulative net profit of RMB1.2 trillion in the first half of 2025, with an average return on equity of 8.19% and return on assets of 0.63%.
China's commercial banks, end of the second quarter of 2025
| Indicator | Level | Change on previous quarter |
|---|---|---|
| NPL ratio | 1.49% | -0.02pp |
| Provision coverage ratio | 211.97% | +3.84pp |
| Capital adequacy ratio | 15.58% | +0.30pp |
| Core tier 1 ratio | 10.93% | +0.24pp |
| Liquidity coverage ratio | 149.25% | +3.05pp |
| Return on equity (Q2 2025) | 8.19% | Not stated |
| Return on assets (Q2 2025) | 0.63% | Not stated |
Japan: on hold, with balance-sheet normalisation continuing
The Bank of Japan kept its policy rate at around 0.5% throughout the period. On 17 June 2025 it decided, by an 8-1 vote, to keep reducing its JGB purchases so that monthly buying falls to about 2 trillion yen in January-March 2027. The reductions are about 400 billion yen each quarter until January-March 2026 and about 200 billion yen each quarter from April-June 2026.
The Bank's April 2025 Financial System Report described a system that is lending and repricing. Annual growth of domestic loans by privately owned banks had remained around 3%, and many banks had raised ordinary deposit rates to around 0.2%. In the first half of fiscal 2024, the CET1 ratio of internationally active banks and the core capital ratio of domestic banks substantially exceeded requirements. The Bank judged that Japanese banks have sufficient capital and stable funding to withstand stress.
Mitsubishi UFJ Financial Group reported net income of 546.0 billion yen for the quarter to 30 June 2025, up 12.0 billion yen on the year and 27.3% of its full-year target. That target is 2 trillion yen, which the group describes as a historical high.
India: front-loaded easing, record capital
The Reserve Bank of India's Monetary Policy Committee cut the repo rate by 50bp to 5.50% on 6 June 2025, with one member preferring 25bp. The cut took the reduction since February 2025 to 100bp, and the Committee changed its stance from accommodative to neutral. The Bank also announced a cut in the cash reserve ratio by 100bp to 3.0% of net demand and time liabilities, in four 25bp tranches from the fortnights beginning 6 September, 4 October, 1 November and 29 November 2025. It expects the cut to release about Rs2.5 lakh crore of primary liquidity by December 2025.
On 6 August the Committee held the repo rate at 5.50% unanimously and kept the neutral stance. Inflation had fallen to a 77-month low of 2.1% in June 2025, and the Bank projected CPI inflation of 3.1% for 2025-26.
The banks enter the easing cycle in strength. The June 2025 Financial Stability Report put the gross NPA ratio of scheduled commercial banks at 2.3% and the net NPA ratio at 0.5% in March 2025, both multi-decadal lows. The capital to risk-weighted assets ratio reached a record 17.3%, and provisioning coverage was 76.3%. Profit after tax rose 16.9% in 2024-25. The report also showed net interest margins declining because of the cost of funds.
Australia: two cuts and steady bank buffers
The Reserve Bank of Australia cut to 3.85% on 20 May 2025, after annual trimmed mean inflation fell to 2.9% in the March quarter, below 3% for the first time since 2021. It held on 8 July, noting that the cash rate was already 50bp lower than five months earlier. It cut again to 3.60% on 12 August, after trimmed mean inflation fell to 2.7% in the June quarter and unemployment rose to 4.3% in June 2025. That took the reduction in 2025 to 75bp.
APRA's statistics for March 2025 show a stable banking system. Authorised deposit-taking institutions earned $40.0 billion in the year to March 2025, up 1.3%, and their total capital ratio was 20.4%. Housing credit quality was mixed: loans 30-89 days past due fell to 0.60% of residential exposures, but non-performing loans rose to 1.08% from 0.96% a year earlier. New residential lending funded in the March quarter rose 18.0% to $154.7 billion.
Commonwealth Bank of Australia's results for the year to 30 June 2025 show how a major lender fared. Cash net profit after tax rose 4% to $10,252 million, and the net interest margin was 2.08%, against 1.99% a year earlier. Its CET1 ratio was 12.3%, against an APRA minimum of 10.25%.
South Korea: easing tempered by household debt
The Bank of Korea cut its Base Rate to 2.50% on 29 May 2025, saying growth was forecast to decline considerably even though concerns about household debt and currency volatility persisted. It then held on 10 July, citing a significant acceleration in Seoul-area housing prices and household debt, with consumer price inflation at 2.2% in June. It held again on 28 August but said it would maintain its rate cut stance.
The Bank's June 2025 Financial Stability Report shows a profitable but slightly less capitalised banking system. Commercial banks earned KRW4.2 trillion in the first quarter of 2025, KRW0.8 trillion more than a year earlier, and their annualised return on assets rose to 0.66% from 0.57%. The net interest margin fell to 1.63% from 1.76%. The total capital ratio was 17.7% and the CET1 ratio 15.4% at the end of the first quarter of 2025, down from 18.1% and 15.6% at the end of the third quarter of 2024. Across all lenders, the household loan delinquency rate rose to 1.05% from 0.95% over the same period, with the increase concentrated in non-bank lenders rather than banks.
Hong Kong and Singapore
Hong Kong imports US policy through its currency board, and the quarter showed how quickly liquidity can swing. In early May the strong-side Convertibility Undertaking was triggered four times, and the HKMA sold HK$129.40 billion, lifting the Aggregate Balance to around HK$174 billion. Interbank rates softened as funding became abundant, and the Hong Kong dollar traded between 7.7500 and 7.8499 against the US dollar from 17 April to 20 June 2025. The HKMA said on 19 June that the wider gap between Hong Kong dollar and US dollar rates had encouraged carry trades. Early on 26 June, Hong Kong time, the weak-side Convertibility Undertaking was triggered for the first time since May 2023, and the HKMA bought HK$9.42 billion, reducing the Aggregate Balance to HK$164.1 billion on 27 June.
In Singapore, the Monetary Authority kept the slope of its exchange-rate band in July after easing twice earlier in 2025, and growth was 4.3% year on year in Q2 2025. DBS Group earned net profit of SGD2.82 billion in the second quarter of 2025, 1% more than a year earlier. Its commercial book net interest margin fell 28bp from a year earlier to 2.55%, while the non-performing loan ratio was 1.0% and the CET1 ratio 17.0% on a transitional basis.
South-east Asia: Indonesia, Thailand and Malaysia
Indonesia
Bank Indonesia's August 2025 review shows weak transmission. Lending rates stood at 9.16% in July 2025, broadly unchanged on the month, despite 100bp of BI-Rate cuts since September 2024. Credit growth slowed to 7.03% in July from 7.77% in June 2025, and lending to micro, small and medium enterprises grew only 1.82%. The central bank said banks preferred to place excess liquidity in securities rather than expand lending. Buffers are high: the capital adequacy ratio was 25.81% and the gross NPL ratio 2.22% in June 2025, and liquid assets were 27.08% of third-party funds in July.
Thailand
The Bank of Thailand cut by a 5-2 vote on 30 April, held by 6-1 on 25 June and cut unanimously to 1.50% on 13 August 2025, a total of 50bp. Its second-quarter banking review shows the pressure on lending and income. Loans contracted 0.9% year on year, and non-performing loans rose to 554.9 billion baht, while the NPL ratio held at 2.91%. The net interest margin fell to 2.72% from 3.04% a year earlier, as rate cuts, lower loan volumes and a borrower relief programme reduced interest income. Return on assets was 1.27% and the capital ratio 21.0%. In August the Bank said credit quality had continued to deteriorate, especially in SME and housing loans.
Thai commercial banks
| Indicator | Q2 2024 | Q1 2025 | Q2 2025 |
|---|---|---|---|
| Capital (BIS) ratio | 19.9% | 20.7% | 21.0% |
| NPL coverage ratio | 172.4% | 173.6% | 174.4% |
| Net interest margin | 3.04% | 2.80% | 2.72% |
| Return on assets | 1.26% | 1.16% | 1.27% |
| Return on equity | 9.45% | 8.37% | 9.26% |
Source: Bank of Thailand, Banking Sector Quarterly Brief (Q2 2025), 19 August 2025.
### Malaysia Bank Negara Malaysia's reserve requirement cut released about RM19 billion of liquidity, and it described the July cut to 2.75% as pre-emptive. Outstanding loans grew 5.5% in the second quarter of 2025, with household loans up 6%, while the economy expanded by 4.4%.
Cross-country comparison
Asia Pacific banking systems: latest published indicators (reference dates in brackets)
| System | Capital | Asset quality | Profitability |
|---|---|---|---|
| China, commercial banks | CAR 15.58% (Q2 2025) | NPL 1.49% (Q2 2025) | ROA 0.63% (Q2 2025) |
| India, scheduled commercial banks | CRAR 17.3% (Mar 2025) | Gross NPA 2.3% (Mar 2025) | Profit after tax +16.9% (2024-25) |
| Australia, ADIs | Total capital 20.4% (Mar 2025) | Housing NPL 1.08% (Mar 2025) | Net profit $40.0bn (year to Mar 2025) |
| South Korea, commercial banks | Total capital 17.7% (Q1 2025) | Household loan delinquency, all lenders 1.05% (Q1 2025) | ROA 0.66% (Q1 2025) |
| Indonesia, banks | CAR 25.81% (Jun 2025) | Gross NPL 2.22% (Jun 2025) | Not available |
| Thailand, commercial banks | BIS ratio 21.0% (Q2 2025) | NPL 2.91% (Q2 2025) | ROA 1.27% (Q2 2025) |
Source: National Financial Regulatory Administration, 2025年二季度银行业保险业主要监管指标数据情况 (Main supervisory indicators of the banking and insurance sectors, Q2 2025), 15 August 2025; Reserve Bank of India, Financial Stability Report, June 2025: Chapter II, Financial Institutions: Soundness and Resilience, 30 June 2025; Australian Prudential Regulation Authority, APRA releases quarterly authorised deposit-taking institution statistics for March 2025, 13 June 2025; Bank of Korea, Financial Stability Report (June 2025), English translation, 29 August 2025; Bank Indonesia, Monetary Policy Review August 2025, 22 August 2025; Bank of Thailand, Banking Sector Quarterly Brief (Q2 2025), 19 August 2025.
Capital ratios are not directly comparable across jurisdictions, but every system shown reports capital well into double figures. Among the system-wide NPL measures, China's 1.49% is the lowest and Thailand's 2.91% the highest, with India and Indonesia in between. Thailand's loan book was contracting, unlike those of China, Indonesia and Malaysia.
Outlook risks
Margins are the common pressure. Net interest margins were lower year on year in Korea and Thailand and at DBS, and the Reserve Bank of India reported declining margins, while lower policy rates were feeding through to loan rates in China but not yet in Indonesia. Asset quality is the second watch point: Thai credit quality was deteriorating in SME and housing loans, and Korean household loan delinquency across all lenders had risen to 1.05%. In Korea, concern over Seoul-area housing prices and household debt led the central bank to hold in July. In Hong Kong, the HKMA has warned that interbank rates may rise as the Aggregate Balance declines.
What to watch
- 29 September to 1 October 2025: next meeting of the Reserve Bank of India's Monetary Policy Committee.
- 4 October, 1 November and 29 November 2025: further 25bp tranches of the Reserve Bank of India's cash reserve ratio cut take effect, reaching 3.0% of net demand and time liabilities.
- January-March 2026: the Bank of Japan's quarterly reductions in JGB purchases of about 400 billion yen continue until this quarter, then slow to about 200 billion yen.
Primary sources: National Financial Regulatory Administration, 2025年二季度银行业保险业主要监管指标数据情况 (Main supervisory indicators of the banking and insurance sectors, Q2 2025), 15 August 2025; Reserve Bank of Australia, Statement by the Monetary Policy Board: Monetary Policy Decision (Media Release 2025-13), 20 May 2025; Reserve Bank of Australia, Statement by the Monetary Policy Board: Monetary Policy Decision (Media Release 2025-22), 12 August 2025; People's Bank of China, 2025年第二季度中国货币政策执行报告 (China Monetary Policy Report, Q2 2025), 15 August 2025; Reserve Bank of India, Monetary Policy Statement, 2025-26: Resolution of the Monetary Policy Committee, June 4 to 6, 2025 (Press Release 2025-2026/489), 6 June 2025; Bank of Korea, Monetary Policy Decision & Opening Remarks to the Press Conference (May 29, 2025), 29 May 2025; Bank Indonesia, Monetary Policy Review August 2025, 22 August 2025; Bank of Thailand, Monetary Policy Committee's Decision 2/2025 (BOT Press Release No. 18/2025), 30 April 2025; Bank of Thailand, Monetary Policy Committee's Decision 4/2025 (BOT Press Release No. 29/2025), 13 August 2025; Bank Negara Malaysia, Monetary Policy Statement (9 July 2025), 9 July 2025; Bank of Japan, Statement on Monetary Policy (1 May 2025), 1 May 2025; Bank of Japan, Statement on Monetary Policy (31 July 2025), 31 July 2025; Reserve Bank of India, Financial Stability Report, June 2025: Chapter II, Financial Institutions: Soundness and Resilience, 30 June 2025; Bank of Thailand, Banking Sector Quarterly Brief (Q2 2025), 19 August 2025; Bank of Korea, Financial Stability Report (June 2025), English translation, 29 August 2025; DBS Group Holdings, DBS second-quarter profit before tax up 5% to SGD 3.39 billion, net profit rises 1% to SGD 2.82 billion (News Release Ref No. 03/2025), 7 August 2025; Bank of Japan, Statement on Monetary Policy (17 June 2025), 17 June 2025; Bank of Korea, Monetary Policy Decision & Opening Remarks to the Press Conference (July 10, 2025), 10 July 2025; Bank Negara Malaysia, Decrease in the Statutory Reserve Requirement (SRR) Ratio, 8 May 2025; Reserve Bank of India, Monetary Policy Statement, 2025-26: Resolution of the Monetary Policy Committee, August 4 to 6, 2025 (Press Release 2025-2026/841), 6 August 2025; Bank of Korea, Monetary Policy Decision & Opening Remarks to the Press Conference (August 28, 2025), 28 August 2025; Bank Indonesia, Monetary Policy Review May 2025, 23 May 2025; Monetary Authority of Singapore, MAS Monetary Policy Statement - July 2025, 30 July 2025; Bank of Japan, Financial System Report (April 2025), 23 April 2025; Mitsubishi UFJ Financial Group, Financial Highlights under Japanese GAAP for 1st Quarter of the Fiscal Year Ending March 31, 2026, 4 August 2025; Reserve Bank of India, Governor's Statement: June 6, 2025, 6 June 2025; Reserve Bank of Australia, Statement by the Monetary Policy Board: Monetary Policy Decision (Media Release 2025-17), 8 July 2025; Australian Prudential Regulation Authority, APRA releases quarterly authorised deposit-taking institution statistics for March 2025, 13 June 2025; Commonwealth Bank of Australia, CBA 2025 Full Year Results: Profit Announcement (ASX announcement), 13 August 2025; Hong Kong Monetary Authority (via HKSAR Government press release), Record of discussion of meeting of Exchange Fund Advisory Committee Currency Board Sub-Committee held on July 2, with Report on Currency Board Operations (17 April - 20 June 2025), 13 August 2025; Hong Kong Monetary Authority, HKMA's Response to US Fed's Interest Rate Decision, 19 June 2025; Hong Kong Monetary Authority, HKMA's response to media enquiries (weak-side Convertibility Undertaking), 26 June 2025; Bank of Thailand, Monetary Policy Committee's Decision 3/2025 (BOT Press Release No. 22/2025), 25 June 2025; Bank Negara Malaysia, Economic and Financial Developments in Malaysia in the Second Quarter of 2025, 15 August 2025.