Trends in Bank Lending Activity During Q1 2025

The National Bank of Serbia has published the report Trends in Lending Activity for Q1 2025. The report aims to provide a better understanding of the domestic credit market by analyzing credit activity trends, borrowing costs for businesses and households, and the factors affecting credit supply and demand.

In addition, the report incorporates findings from the Bank Lending Survey, conducted by the National Bank of Serbia since 2014, which provides insights into banks’ views on current and expected developments in lending activity. It also includes data from the European Investment Bank’s survey under the Vienna Initiative 2, which monitors the reduction of international banking groups’ exposure and constraints on credit activity.

Corporate loans accelerated their year-on-year growth to 7.4% in March (from 4.8% in December 2024). Corporate loans account for nearly half of banks’ total claims on the non-monetary sector. In nominal terms, their balance reached RSD 1,702.5 billion in March, with a share in GDP of 17.4%, down by 0.1 percentage points compared to end-2024.

In Q1 2025, corporate lending increased by RSD 13.0 billion, driven by a RSD 20.08 billion increase in borrowing by public enterprises, while loans to private companies declined by RSD 7.8 billion. The overall growth was supported by dinar-denominated loans (up RSD 22.6 billion), while FX-indexed loans decreased (by RSD 9.6 billion). This shift toward dinar loans was influenced by the Capital Adequacy Decision, which from 2025 obliges banks to reduce their capital if the share of FX and FX-indexed loans in total loans to the non-financial and non-government sector approved after July 1, 2023 exceeds a set threshold (71% in 2025).

In terms of purpose, companies primarily used loans for liquidity and working capital, accounting for nearly 80% of the quarterly increase. There was also growth in current account overdrafts, other uncategorized loans, and investment loans, while loans for imports declined. These trends led to a 0.2 percentage point increase in the share of liquidity and working capital loans in total corporate loans, reaching 47.3% in March, while the share of investment loans decreased by 0.3 percentage points to 42.5%.

By industry, borrowing increased most notably in the energy sector, followed by transport, trade, and real estate, while companies in manufacturing reduced their indebtedness.

By company size, micro, small, and medium-sized enterprises (MSMEs) recorded a higher increase in borrowing than large enterprises. As a result, the share of loans to MSMEs rose by 0.1 percentage points in Q1, to 60.9% in March, with their year-on-year growth accelerating to 11.5%.

The growing share of dinar versus FX-indexed loans increased the degree of dinarization in corporate lending by 0.3 percentage points, to 21.2% in March. The share of euro and euro-indexed loans decreased by 0.3 percentage points to 78.7%. Within FX and FX-indexed loans, 79% were linked to EURIBOR, mostly the 3-month rate. Among dinar loans, 24% were tied to BELIBOR, mostly 1-month and 3-month rates.

The share of non-performing loans (NPLs) in total corporate loans decreased by 0.2 percentage points in Q1, reaching a new low of 1.6% in March. This confirms that economic support measures during the pandemic were effective and timely, and that asset quality remained stable even after their expiration, despite rising debt servicing costs during monetary tightening.

Interest rates on both dinar and euro-denominated loans declined further in Q1, driven by the National Bank of Serbia’s previous monetary policy easing and continued rate cuts by the European Central Bank. The weighted average interest rate on newly approved dinar loans to corporates decreased by 0.5 percentage points to 6.7%. However, interest rates on investment loans rose to 7.3% (from 7.0%), and on other uncategorized loans to 7.5% (from 7.4%). Meanwhile, the average interest rate on newly approved euro and euro-indexed loans decreased by 0.6 percentage points to 5.3%.

According to the April survey by the National Bank of Serbia, banks tightened credit conditions for corporates in Q1, but expect to ease them slightly in Q2. The tightening affected both dinar and FX-indexed loans across all company sizes, and included higher collateral requirements, stricter risk assessments, and reduced maximum loan amounts. At the same time, banks reduced interest margins, fees, and commissions in Q1, even while tightening other conditions. Risk assessment criteria and access to credit became stricter, although some systemic factors had the opposite effect—supporting lending.

Banks reported a decline in credit demand, especially for long-term loans and mainly among large companies. The main reasons cited were reduced investment needs, lower inventory levels, and greater reliance on internal funding. A slight recovery in demand is expected in Q2, particularly for working capital and investment financing.

Household credit growth continued to accelerate, reaching 11.6% year-on-year in March (compared to 10.4% in December 2024). This was driven by eased lending standards, increased demand, and favorable financing conditions. The total balance of household loans reached RSD 1,659.1 billion in March, increasing their share in GDP by 0.2 percentage points to 17.0%. In Q1 alone, household loans grew by RSD 41.5 billion, led by cash and housing loans. The growth was supported by looser credit standards, lower interest rates, and rising wages. The share of cash loans in total household loans rose by 0.2 percentage points to 46.5%, while the share of housing loans slightly declined to 38.3%. On a year-on-year basis, cash loans grew by 15.2%, and housing loans by 9.6%.

Regarding housing loans, the National Bank of Serbia extended the interest rate cap into 2025, limiting them to a maximum of 5%. Interest rate caps were also applied to cash and consumer loans, credit card debt, and current account overdrafts. Regulatory changes from December 2024 enabled the implementation of a government housing loan program for youth, allowing clients to participate in real estate purchases with as little as 1% down payment and a lower risk weight (35%). The simplified procedure for consumer loans up to RSD 90,000 was extended through June 2025.

The volume of newly approved household loans in Q1 amounted to RSD 216.3 billion, 37.1% higher than in the same period of 2024. Cash loans made up 70% of this amount, followed by housing loans with a 16% share.

In terms of currency, 55.5% of newly approved loans were in dinars (slightly up from 55.4% in December 2024), while euro loans accounted for 44.4% (down from 44.5%), and loans in Swiss francs remained at 0.1%. Among FX and FX-indexed loans, 60% were linked to EURIBOR—mostly the 6-month rate. For dinar loans, 87% were approved at fixed interest rates, while among variable-rate loans, most were tied to the 3-month BELIBOR.

The share of NPLs in household lending declined further in Q1, reaching a new low of 3.2% in March, 0.2 percentage points below end-2024. NPLs decreased across almost all loan categories, indicating that measures by the National Bank of Serbia and the government were timely and helped reduce the negative impact of the crisis on household creditworthiness.

According to the National Bank of Serbia’s survey, banks continued to ease standards for household loans in Q1—especially for dinar cash and refinancing loans, and FX-indexed housing loans. This easing was primarily due to lower financing costs and increased competition. Survey results also show that interest margins were further reduced in Q1, especially for dinar loans, and that banks have, for the first time in a while, lowered fees and commissions.

Household credit demand continued to rise in line with expectations, primarily for dinar cash loans, refinancing, and FX-indexed housing loans, with a slight increase in consumer loan demand as well. The main drivers were the need to refinance existing obligations, wage growth, purchases of durable goods, and interest rate caps. Banks expect similar demand growth in Q2 2025, especially for housing loans—likely driven by the youth housing loan program.