Economist Vladimir Vasić has expressed approval of the National Bank of Serbia’s (NBS) announcement regarding permanent limits on interest rates for various types of loans. According to Vasić, this move is positive for Serbian citizens, as it is expected to lead to savings in their budgets.
NBS Governor Jorgovanka Tabaković revealed that new regulations are being drafted to cap interest rates on housing, consumer, and cash loans, as well as to manage overdrafts on current accounts. These changes will be part of proposed amendments to the Law on the Protection of Users of Financial Services, which will be presented to Parliament in the upcoming autumn session.
Vasić emphasized that while temporary measures to limit loan interest rates were in place until December 31, 2024, the new legal framework aims to establish permanent limits. He noted that this could provide significant financial relief to individuals with existing loans. “From the perspective of citizens with loans, lower interest rates translate to savings in their budgets,” Vasić said. He added that the cost of borrowing, like any commodity, increases with higher demand.
Vasić also highlighted that permanent interest rate caps could have implications for banks. “This will impact banks as they will need to adjust their balance sheets accordingly. If there’s a cap on the cost of borrowing, the returns on deposits might also be affected,” he explained. He advised careful consideration of the overall financial system, suggesting that capping interest rates in one area without addressing other financial components could disrupt the balance.
The economist reiterated that the proposed limits are expected to help consumers by ensuring that they won’t pay more than the capped interest rates. “For instance, if you borrow 100,000 dinars and repay 110,000 dinars, the 10,000 dinars difference is the cost of borrowing. Capping this rate is beneficial for citizens,” Vasić noted.
He also speculated that these measures might align with European Union directives, as similar restrictions are present in some EU countries.
Regarding overdrafts, Vasić advised against using the full allowed limit. “In our region, people often use only a portion of the permitted overdraft. If your salary is 80,000 dinars and the allowed overdraft is 70,000, using 35,000 is common. However, overdraft interest rates can be very high, ranging from 20% to 30%. It’s best to use overdrafts only as a short-term solution,” he warned.
On the topic of housing loans, Vasić confirmed that there is still strong interest. “Currently, 48% of loans are ready-made, over 45% are housing loans, and the rest are consumer loans. While small cash loans may not be significantly affected by interest rate changes, large loans, such as those for housing, are more sensitive to interest rate fluctuations. Even a small change in the interest rate can have a significant impact,” he concluded.
