The combined balance of bad loans at the seven major banking groups appears to have dropped by 13 percent to 18.1 trillion yen during the six months to Sept. 30, according to banking sources.

Should relatively favorable economic conditions remain in place, the balance might fall below 15 trillion yen by March 31, giving further impetus to a nascent economic rebound, observers say.

The seven groups are Mizuho Financial Group Inc., Sumitomo Mitsui Financial Group Inc., Mitsubishi Tokyo Financial Group Inc., UFJ Holdings Inc., Resona Holdings Inc., Mitsui Trust Holdings Inc., and Sumitomo Trust & Banking Co.