Coverage: Q3 2026 · Information to 13 October 2026
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TGB Quarterly Regional Banking Monitor · 13 October 2026
The Reserve Bank of Australia, Bank of Japan, Bank of Korea and Reserve Bank of India all raised rates between 16 July and 7 October 2026, while Bank Indonesia held at 5.75% and Indian banks reported a system capital ratio of 17.87%.
The desk view
Asia-Pacific monetary policy tightened in step only in part. The Reserve Bank of Australia moved to 4.60% on 29 September 2026, the Bank of Korea raised its Base Rate on 16 July and 27 August, and the Reserve Bank of India changed its stance to calibrated tightening on 7 October. Bank Indonesia held the BI-Rate at 5.75% at each of its July, August and September meetings. Banks entered this phase with strong balance sheets: India's scheduled commercial banks reported a gross NPA ratio of 1.67% in June 2026, and Hong Kong's classified loan ratio fell to 1.82% in the second quarter. This suggests lenders face higher policy rates with asset quality improving rather than deteriorating.
Regional picture: policy tightens at different speeds
The Reserve Bank of Australia raised the cash rate target by 25 basis points to 4.60% on 29 September 2026. On 18 September 2026 the Bank of Japan's Policy Board voted 7-2 to guide the overnight call rate to around 1.25%, a 25 basis point move from the around 1.0% it kept at its 31 July 2026 meeting. The Bank of Korea raised its Base Rate by 25 basis points on 16 July 2026 and by a further 25 basis points on 27 August 2026, a combined 50 basis points that took it from 2.50% to 3.00%. The Reserve Bank of India's Monetary Policy Committee voted unanimously on 7 October 2026 to raise the policy repo rate by 25 basis points to 5.50%.
Bank Indonesia is the exception. It held the BI-Rate at 5.75% at its July, August and September 2026 meetings, with the Deposit Facility rate at 4.75% and the Lending Facility rate at 6.50% each time. That pause followed increases of 50 basis points at the 19-20 May 2026 meeting and 25 basis points at the 17-18 June 2026 meeting, 75 basis points in all.
Forward guidance differs as well. The RBA Board said it would continue to do what it considers necessary, including increasing the cash rate target further if needed. The Bank of Japan said it would continue to raise the policy interest rate and adjust the degree of monetary accommodation. The Bank of Korea said it would decide the timing and pace of further increases in the Base Rate while assessing inflation, the domestic economy and financial stability. The Reserve Bank of India's committee said rate cuts were off the table in the near term and that policy action ahead could only be a rate hike or a pause.
Bank balance sheets were firm at the latest reporting dates. India's scheduled commercial banks reported a system-level capital to risk-weighted assets ratio of 17.87% and a gross NPA ratio of 1.67% in June 2026. Indonesian banks reported a capital adequacy ratio of 23.84% and a gross NPL ratio of 2.10% in July 2026. In Hong Kong the classified loan ratio of all authorised institutions declined to 1.82% in the second quarter of 2026.
Margins are the area where outcomes diverge. The net interest margin of India's scheduled commercial banks was 3.22% in June 2026, 4 basis points below the 3.26% a year earlier. Hong Kong retail banks' net interest margin widened to 1.53% in the first half of 2026 from 1.47% a year earlier, a gain of 6 basis points. DBS reported that its group net interest margin fell 18 basis points to 1.87% in the second quarter of 2026. CBA's net interest margin was 2.05% against 2.08% a year earlier.