After the decision of the National Bank of Serbia to raise banks’ reserve requirements, it can be expected that dinar loans will become more expensive, says Svetlana Popović, a professor at the University of Belgrade’s Faculty of Economics.
The National Bank of Serbia kept the reference interest rate at the level of 6.5 percent, but increased the rate of required reserves of banks at the National Bank of Serbia on a foreign currency basis by three percentage points each, to 23 percent and 16 percent for liabilities with a contracted maturity of up to two years and over two years, in order to reduce inflation.
Which loans will become more expensive?
Svetlana Popović, a professor at the Faculty of Economics, says that the increase in the rate of required reserves is a measure of restrictive monetary policy, which reduces the percentage of deposits that banks can use for their placements.
“This reduces the available liquidity of banks (and credit potential) and should increase the price of liquidity, that is, the money that banks trade with each other.” Therefore, we can expect the growth of domestic leading interest indicators (Belibor and Beonia), which are the basis for determining interest rates on bank placements in dinars. This means that we can expect dinar loans to become more expensive,” assesses Popović.
For citizens who have a fixed interest rate (that’s about 62 percent of approved dinar loans to citizens) on already approved dinar loans, there will be no interest rate changes. Therefore, the loan installments they repay will remain the same. For citizens who have a variable interest rate, the interest will increase, so they will pay a slightly higher installment. Higher interest or loan installments will be for newly approved loans, says Popović.