Serbia’s corporate borrowers are facing tighter bank financing conditions at a time when demand for credit is increasing, creating a widening gap between companies’ funding needs and banks’ willingness to assume risk. The trend is highlighted by the National Bank of Serbia’s (NBS) bank lending survey for the second quarter of 2026, which covered 17 banks accounting for more than 99% of total banking-sector assets.
- Lending conditions tighten across corporate segments
- Capital investment drives stronger loan demand
- Borrower requirements become more important
- Dinar lending expected to gain momentum
- Subsidised agriculture lending provides an exception
- Corporate investment faces higher financing requirements
- Reduced bank competition affects refinancing
- Alternative funding channels gain relevance
Banks reported tighter corporate lending standards during the quarter and anticipate additional restrictions in the third quarter. At the same time, corporate demand increased across all major loan categories, with lenders expecting further growth in demand during the coming quarter. The developments do not indicate a withdrawal of bank credit from the economy. Companies continue to borrow and banks continue to extend financing, but access is becoming more selective as lending costs and other requirements increase.
Lending conditions tighten across corporate segments
The tightening reported by Serbian banks covered both short- and long-term loans, as well as dinar and foreign-currency financing. Both SMEs and large companies faced stricter standards. Agriculture was the main exception, with lending standards for farmers remaining broadly unchanged. Banks expect the overall tightening pattern to continue in the third quarter.
Among the factors cited by banks were higher funding costs, weaker competitive pressure, increased risk perceptions and lower willingness to assume risk. These factors are expected to continue influencing lending decisions during the third quarter. The changes have extended beyond interest rates. Banks raised lending margins across corporate loan categories while also tightening conditions relating to fees and commissions, maximum loan amounts, collateral requirements and maturities for most borrowers. For companies, the combined effect can be more significant than an increase in the nominal interest rate alone. A borrower facing a higher margin while also receiving a smaller loan, providing additional collateral and accepting a shorter maturity can face substantially different financing requirements for the same project.
Capital investment drives stronger loan demand
Despite the stricter supply conditions, banks reported increased corporate demand for every major type of lending during the second quarter. The main drivers were higher financing requirements for capital investment and working capital. Banks expect corporate demand to increase again in the third quarter, with particularly strong growth anticipated for dinar-denominated lending.
Demand linked to capital expenditure includes financing requirements associated with new investment by companies. The simultaneous increase in working-capital demand indicates that businesses are also seeking additional liquidity for ongoing operations. Working-capital requirements can arise from expanding production and inventories as well as from changes in receivables, payment periods and operating costs. The NBS survey does not distinguish between those individual factors. The combination nevertheless places companies in a more demanding financing environment: corporate borrowing requirements are increasing while banks are applying stricter lending criteria.
Borrower requirements become more important
The tightening of lending standards increases the importance of companies’ balance sheets, collateral positions and financial capacity when securing new or renewed facilities. Companies with stronger financial positions can continue to access bank funding, while borrowers with higher leverage or weaker collateral can face more restrictive terms. The same conditions can affect different types of corporate transactions in different ways. Companies undertaking acquisitions may require more equity if banks reduce leverage. Manufacturers financing additional capacity may face higher annual debt-service requirements if loan maturities are shortened.
Businesses refinancing existing facilities could also encounter higher margins, tighter conditions and lower permissible leverage when their loans mature. These effects may become more visible during late 2026 and 2027, as new investment projects seek financing and existing corporate facilities come up for renewal.
Dinar lending expected to gain momentum
Banks expect the increase in corporate borrowing to continue during the third quarter, particularly through dinar-denominated loans. Euro and euro-indexed financing remains relevant for large investments, exporters and companies with revenues linked to the euro. For businesses generating most of their income in dinars, however, local-currency borrowing can reduce currency-mismatch exposure.
The choice between dinar and euro financing also requires companies to consider differences in funding costs and the broader structure of their financial risk rather than focusing solely on the headline interest rate. The expected increase in demand for dinar credit adds another element to Serbia’s corporate financing market as companies assess how to fund investment and working-capital requirements.
Subsidised agriculture lending provides an exception
Agriculture remains outside much of the broader tightening trend identified by the NBS. The central bank said stronger demand from farmers was partly supported by subsidised lending provided by international financial institutions and funds. The agricultural lending experience illustrates the role of external financing and risk-sharing mechanisms in maintaining credit availability when commercial banks become more cautious.
Such mechanisms can support lending where financing costs are subsidised or part of the lending risk is shared through institutional programmes. The same type of financing structure is relevant to investment areas including renewable energy, industrial decarbonisation, export manufacturing, energy efficiency and infrastructure-related projects, where international financial institutions and development institutions can provide additional financing alongside commercial banks.
Corporate investment faces higher financing requirements
The current lending cycle is characterised by continued corporate demand rather than a broad reduction in companies’ willingness to borrow. The principal constraint identified by the NBS survey is instead on the supply side, with banks continuing to finance companies while demanding greater protection against credit and funding risks. This can increase the contribution required from shareholders on major projects. Companies may need to provide larger equity portions, stronger guarantees or greater debt-service buffers to secure bank financing.
For mergers and acquisitions, lower leverage availability can affect the amount buyers are able to finance through debt. For renewable-energy and infrastructure projects, higher lending margins and shorter maturities can alter project financing structures and equity requirements. For manufacturers, financing conditions can influence whether investment is funded through new bank borrowing or retained earnings. For smaller businesses, tighter lending standards can determine whether financing is available on commercially viable terms.
Reduced bank competition affects refinancing
The NBS survey also points to reduced competitive pressure within the banking sector as one of the factors contributing to tighter lending conditions. Lower competition can reduce borrowers’ ability to obtain more favourable terms by moving an existing facility from one bank to another.
This is particularly relevant for refinancing. Companies that secured substantial debt during periods of easier credit could face higher margins, stricter covenants or lower acceptable leverage when those facilities mature. Businesses unable to provide additional equity may consequently need to adjust investment plans, dispose of assets or seek other sources of financing.
Alternative funding channels gain relevance
The more restrictive bank environment increases the potential relevance of financing sources outside conventional bilateral bank loans. Companies can use leasing, factoring, supplier credit, corporate bonds, private debt and financing supported by international financial institutions as alternatives or complements to bank lending. Serbia’s domestic corporate bond market remains small relative to bank-based financing, but tighter bank conditions provide a stronger incentive for larger companies to examine capital-market funding.
For banks, wider margins and more selective lending can also create opportunities to earn higher risk-adjusted returns where institutions are able to assess corporate credit risk effectively. The NBS survey does not point to a broad retreat from corporate lending or financial-sector stress. Instead, it shows banks becoming more cautious while companies continue to seek financing for investment and operations. The result is a corporate credit market in which demand for financing is rising while lending standards are becoming stricter, with further tightening expected in the third quarter of 2026.
