Serbia’s banking sector expanded lending at a double-digit pace in June while maintaining its strongest reported asset-quality position, with total domestic credit rising 16.6% year on year and the gross non-performing loan ratio declining to a record 2.0%. The increase was recorded despite the National Bank of Serbia’s 5.75% policy rate and higher borrowing costs. Lending to households grew 20.0%, while credit to companies increased 11.7%, with exchange-rate effects excluded.
The second quarter also brought substantial additions to corporate and household loan books, while the composition of new borrowing showed continued demand for investment financing as well as working capital and consumer credit.
Corporate borrowing expands across investment and working capital
Corporate lending increased by RSD 67.5 billion in Q2, with almost the entire increase attributable to companies. Liquidity and working-capital loans rose by RSD 39.9 billion, while investment loans increased by RSD 38.4 billion. Investment lending was 14.6% higher year on year and accounted for 43.2% of the corporate loan portfolio at the end of June. Working-capital and liquidity facilities represented another 48.3%.
Real estate, construction and trade companies posted the largest increases in borrowing during the quarter. New corporate loans reached RSD 436.4 billion in Q2, up 27.2% from a year earlier. Working-capital facilities accounted for 58% of new corporate lending, while investment loans represented 28%. Micro, small and medium-sized enterprises accounted for almost two-thirds of the quarterly increase in corporate credit. Their share of total corporate bank lending rose to 60.7%, while lending to the segment increased 12.6% year on year. Three-fifths of newly approved investment loans went to micro, small and medium-sized companies.
Household lending grows faster than corporate credit
Household borrowing expanded by RSD 95 billion during Q2, including RSD 51.2 billion in cash loans and RSD 30.5 billion in housing loans. More than 40% of the quarterly increase in mortgage lending was associated with the government-supported youth housing programme, according to the NBS. By June, cash lending to households was growing 23.2% year on year, while mortgage lending increased 19.0%. Banks approved RSD 311.2 billion of new household loans in the second quarter, representing a 15% increase from the same period of 2025. The composition of household borrowing also continued to shift toward dinar financing. The share of household loans denominated in dinars reached a record 56.9% in June.
Dinar lending continues to gain ground
Dinarisation also increased within corporate lending. The share of corporate loans denominated in dinars reached 24.2%, while the combined corporate and household portfolio recorded a new high of approximately 40.7%. Foreign-currency and euro-indexed loans remain a significant part of Serbia’s banking market, but the rising share of dinar financing reduces borrowers’ exposure to changes in the dinar-euro exchange rate. The shift is occurring alongside continued rapid expansion in overall credit. Total domestic lending to the non-monetary sector rose 16.6% year on year in June, adjusted for exchange-rate movements.
Non-performing loans remain at record-low levels
The acceleration in lending has so far not been accompanied by deterioration in credit quality. The banking sector’s gross NPL ratio fell to 2.0%, while the household NPL ratio stood at 2.6% and the corporate ratio at just 1.4%. Banks also maintained substantial impairment coverage. Impairment allowances on total loans were equivalent to 110.9% of NPLs, while impairment allowances specifically against NPLs amounted to 61.7%.
The NBS credit survey showed that banks nevertheless tightened corporate lending standards during the second quarter. Standards became more restrictive across loan categories as funding costs, risk assessments and competitive conditions affected lending decisions. Household credit standards were broadly unchanged, while banks reported stronger demand for loans from both companies and households.
Higher rates have not stopped loan demand
Borrowing costs increased during the period. The average interest rate on new dinar-denominated corporate loans reached 7.1% in June, compared with 8.5% for new dinar household loans. Corporate loans denominated in or indexed to the euro carried an average cost of about 5.1%, while the corresponding rate for household euro-linked borrowing was 4.8%. Mortgage rates remained at approximately 4.5%.
The lending data show that stronger demand has continued alongside tighter credit standards and higher loan pricing. For banks, the combination of rising loan volumes and relatively high lending rates provides scope for continued expansion of lending income. At the same time, the rapid growth of household and corporate balance sheets is taking place as Serbia enters a major investment cycle involving infrastructure, housing and corporate investment. Household credit growth of 20.0% in June is occurring alongside service inflation above 6% and strong real wage growth, while corporate borrowing is increasing as investment activity expands. The banking system therefore enters the Expo and infrastructure cycle with a 2.0% gross NPL ratio and substantial loan-loss coverage, while overall credit is expanding at 16.6% year on year.
