Philippine banks are experiencing a notable increase in their nonperforming loans (NPL) ratio, which climbed to 3.37% in April, marking the highest level in eight months. This rise is largely due to the dual pressures of inflation and slower economic growth, compounded by elevated borrowing costs influenced by the ongoing conflict in the Middle East. The total value of bad loans reached approximately P579.9 billion (about $10.3 billion USD), representing a nearly 12% increase compared to the previous year. Despite this, banks have reduced their provisions for credit losses, leading to a coverage ratio of 90.85%, the lowest since April 2022. Experts suggest that the increase in NPLs reflects the delayed effects of high interest rates on borrowers, with expectations of stability in the near term as monetary conditions improve. The Bangko Sentral ng Pilipinas (BSP) has responded to the deteriorating inflation outlook by raising its key policy rate by 25 basis points to 4.5%.