The National Bank of Cambodia (NBC) has rejected a request from banks and microfinance institutions to extend preferential loan restructuring measures through the end of 2026, as financial institutions face growing pressure from deteriorating loan quality and rising non performing loans. The decision, reported by Japanese media outlets on September 1, reflects the central bank’s concern that prolonged regulatory relief could delay the recognition of credit problems and weaken the transparency needed to support a resilient financial system and sustainable economic growth.
Lenders had sought a temporary extension of the existing measures until December 31, 2026, arguing that continued flexibility would give financial institutions more room to manage troubled loan portfolios while helping borrowers affected by ongoing economic challenges. The NBC, however, has taken the position that further forbearance could conceal underlying weaknesses in the banking sector rather than resolve them.
Synopsis
The NBC’s decision marks a significant shift toward stricter recognition of credit risk in Cambodia’s financial sector. By declining to extend preferential restructuring measures, the central bank is encouraging lenders to identify problem loans more accurately and ensure that capital and loan loss provisions reflect actual risks. While the move could strengthen financial sector transparency over the longer term, it also raises concerns about borrowers, particularly households and businesses outside major urban centres, that continue to face difficulties servicing their debt.
NBC prioritises transparency in loan quality
Several Japanese media outlets reported that the NBC had declined lenders’ request to continue the temporary loan forbearance framework through the end of 2026. The framework had provided financial institutions with greater flexibility in classifying loans and determining provisions for potential losses.
According to reports, regulators viewed the refusal as a preventive measure designed to stop temporary regulatory relief from becoming a prolonged practice. Continued forbearance could allow financial institutions to postpone recognising loans that have genuinely deteriorated, potentially making it more difficult to assess the true health of the banking system.
The central bank has stressed that transparent asset quality is important for ensuring credit is allocated efficiently and for supporting sustainable economic growth. For businesses and investors, the issue is particularly important because the quality of bank balance sheets influences lending conditions, access to financing and the broader stability of the financial system.
Lenders say temporary relief could help borrowers recover
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 lenders’ position highlights the difficult balance facing Cambodia’s financial sector. On one side, banks and microfinance institutions need to recognise credit risks and maintain adequate provisions. On the other, an abrupt tightening of restructuring rules could place additional pressure on borrowers whose businesses and household incomes have not yet fully recovered.
Non performing loans are putting greater pressure on lenders
The NBC’s decision comes as financial institutions continue to deal with rising non performing loans and a substantial volume of restructured credit. Radio France Internationale based in Cambodia reported on Tuesday that the banking sector’s gross NPL ratio reached 9.6 percent during the first six months of this year, compared with 8.3 percent in 2025.
Loan restructuring can help borrowers experiencing temporary financial difficulties by changing repayment terms, extending repayment periods or otherwise giving them additional time to meet their obligations. Such measures can reduce the immediate risk of default and provide businesses with an opportunity to recover their cash flow.
However, prolonged regulatory forbearance carries a different risk. If deteriorating loans remain under favourable classifications for too long, financial institutions may postpone recognising losses and setting aside sufficient provisions. This can make the financial sector appear healthier than it actually is and delay necessary adjustments.
Cambodia’s borrowers face a difficult economic environment
The debate over loan restructuring comes at a time when Cambodia’s financial sector is dealing with wider economic pressures. Banks and microfinance institutions have accumulated significant restructured loan portfolios, while rising loan impairment is affecting asset quality and profitability.
For businesses, tighter credit conditions could make it more difficult to secure new financing, refinance existing obligations or obtain working capital. Households could also feel the impact if lenders become more cautious about extending credit.
ABC and the Cambodia Microfinance Association (CMA) have previously worked with the NBC on measures intended to support borrowers facing financial difficulties. However, no publicly available statement has confirmed whether either association specifically submitted the latest request to extend the preferential measures.
Analysts call for a more targeted approach
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 said Cambodia continues to face several economic pressures, including weaker international tourist arrivals. He pointed to the latest figure of only 2 million visitors and said the online scam industry had also damaged Cambodia’s reputation while affecting business activity and incomes.
He further argued that Cambodia’s economic outlook remains uncertain because US tariff policies continue to change rapidly, while border tensions with Thailand have 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.”
Rural borrowers could face particular pressure
Seun made clear that his position was not an argument for allowing borrowers to avoid their repayment responsibilities. Instead, he called for a compromise that recognises the different financial circumstances of borrowers.
He said the NBC’s decision could affect a large number of borrowers, particularly people in rural areas who remain heavily dependent on bank and microfinance loans. For these borrowers, access to restructuring can make a significant difference when income has not yet returned to previous levels.
Rather than introducing another blanket extension, Seun suggested that the NBC could examine borrowers individually or by sector, taking into account their actual financial conditions and repayment capacity. Such an approach could allow regulators to distinguish between borrowers facing temporary economic difficulties and those who are deliberately avoiding repayment.
A data driven approach could guide future restructuring
Seun also urged the NBC to work with relevant institutions to conduct a survey of household and business incomes. The objective would be to determine whether borrowers’ revenues have genuinely recovered and whether they are financially capable of meeting existing repayment obligations.
“Based on the findings, the NBC could then take a decision on whether certain borrowers or sectors still require temporary restructuring support,” Seun added.
Such a targeted system could provide policymakers with better information before introducing further measures. It could also help prevent broad based relief from becoming a permanent solution while still protecting viable businesses and households facing temporary financial stress.
What the decision means for businesses and investors
For Cambodia’s business community, the NBC’s decision deserves close attention because credit conditions are closely linked to business expansion, investment and working capital. Financial institutions facing higher NPLs may become more selective when assessing new borrowers, potentially increasing scrutiny of cash flow, collateral and repayment capacity.
Businesses that rely heavily on bank or microfinance financing may therefore need to strengthen cash flow management, review debt exposure and prepare for more disciplined lending standards. Entrepreneurs and investors should also pay attention to developments in Cambodia’s credit market because changes in loan classification and provisioning can influence both the availability and cost of financing.
For investors, greater transparency around asset quality could ultimately be positive for the financial system. A clearer recognition of bad loans may create short term pressure for lenders, but it can also provide a more accurate picture of financial sector risks and help support healthier credit allocation over time.
Conclusion
The NBC’s refusal to extend preferential loan restructuring measures puts Cambodia’s financial sector at an important crossroads. The central bank is seeking greater transparency and more accurate recognition of credit risks, while lenders and some economic analysts are concerned that borrowers still need additional time to recover from a difficult economic environment.
The challenge now is finding a policy approach that does not hide deteriorating loans but also does not unnecessarily push viable businesses and households into deeper financial distress. A more targeted assessment based on borrowers’ actual income, repayment capacity and economic conditions could offer a middle ground.
For businesses, entrepreneurs, investors and financial institutions, the message is clear: Cambodia’s credit environment is becoming more disciplined, and understanding debt exposure, cash flow and financing risks will be increasingly important as the sector adjusts to the end of extended loan forbearance.