Serbia’s banking system is producing a combination that is unusual late in a monetary tightening cycle: double-digit credit growth, record-low bad loans and rising borrowing costs at the same time.
Total domestic lending to the non-monetary sector increased 16.6% year on year in June 2026, adjusted for exchange-rate effects. Household credit rose 20.0%, while corporate lending increased 11.7%. Yet the banking system’s gross non-performing loan ratio fell to a new low of 2.0%.
The figures suggest that the transmission of Serbia’s 5.75% policy rate is restraining the cost of credit more effectively than the quantity of credit. Loan rates have moved higher, but demand remains strong enough to support rapid balance-sheet expansion.
Corporate lending increased by RSD 67.5bn in Q2. Almost all of the increase came from corporate companies, with liquidity and working-capital loans adding RSD 39.9bn and investment loans RSD 38.4bn. The composition is therefore not simply defensive borrowing to cover short-term cash requirements; investment credit is also expanding.
Investment lending grew 14.6% year on year and represented 43.2% of the corporate loan portfolio by June. Working-capital and liquidity facilities accounted for 48.3%. Real estate, construction and trade companies recorded the strongest increase in borrowing during the quarter, fitting the broader picture of an economy moving into a large infrastructure and property investment cycle.
Small and medium-sized businesses are also taking a larger share. Almost two-thirds of the Q2 increase in corporate lending went to micro, small and medium enterprises. Their share of total corporate bank credit rose to 60.7%, with lending to the segment increasing 12.6% year on year.
New corporate lending reached RSD 436.4bn in Q2, 27.2% more than a year earlier. Working-capital facilities represented 58% of new loans and investment loans 28%. Three-fifths of new investment lending was directed towards micro, small and medium companies.
Household borrowing is expanding even faster. Loans to households increased by RSD 95bn during Q2, including RSD 51.2bn of cash loans and RSD 30.5bn of housing loans. The government-supported youth housing programme accounted for more than 40% of the quarterly increase in mortgage lending, according to the NBS.
Cash loans were growing 23.2% year on year in June and mortgages 19.0%. Newly approved household loans totalled RSD 311.2bn in Q2, 15% higher than in the same period of 2025.
Dinarisation is another important part of the story. Households continued to borrow predominantly in dinars, taking the dinar share of household lending to a record 56.9% in June. For corporate loans, the ratio increased to 24.2%. On the combined corporate and household portfolio, the NBS reported a record level of around 40.7%.
That shift reduces one of the traditional sources of financial vulnerability in Serbia: the sensitivity of domestic borrowers to movements in the dinar against the euro. Foreign-currency and euro-indexed lending remains substantial, but the direction of travel is towards a greater role for local-currency financing.
Credit quality has not deteriorated alongside faster lending. The gross NPL ratio reached 2.0%, with household NPLs at 2.6% and corporate NPLs at only 1.4%. The NBS also reports substantial provisioning: impairment allowances on total loans were equivalent to 110.9% of NPLs, while impairment specifically against NPLs stood at 61.7%.
That asset-quality profile is one reason rapid credit growth has not yet translated into a clear systemic-risk signal. Banks are expanding from a comparatively clean loan book and borrowers are benefiting from strong nominal income growth.
The lending survey nevertheless shows that banks are becoming more selective. Credit standards for companies tightened across loan types in Q2 as funding costs, risk perception and competition influenced lending decisions. Standards for households were broadly unchanged. At the same time, banks reported stronger demand from both businesses and households.
The coexistence of tighter standards and faster lending suggests that credit demand is sufficiently strong to overcome more restrictive pricing and underwriting. That is consistent with Serbia’s broader macro mix: real wages rising, infrastructure construction accelerating, housing demand receiving policy support and corporate investment expanding.
Borrowing costs have indeed increased. The average rate on new dinar corporate loans rose to 7.1% in June, while new dinar household loans averaged 8.5%. Euro-denominated or euro-indexed corporate borrowing cost around 5.1%, and household euro-linked loans 4.8%. Mortgage rates remained around 4.5%.
For banks, this environment is potentially favourable for revenue growth: loan volumes are rising while pricing remains relatively elevated. The central risk is not current asset quality but the speed at which balance sheets are expanding ahead of a major investment cycle.
A 20% increase in household lending is difficult to treat as neutral from a macroeconomic perspective when service inflation remains above 6% and real wages are rising strongly. The NBS’s decision to keep monetary policy cautious is easier to understand when credit data are viewed alongside consumer inflation rather than in isolation.
Serbia’s banking system is therefore entering the Expo and infrastructure cycle from a position of strength, but also with considerably more momentum than headline interest-rate settings would imply. The 2.0% NPL ratio demonstrates the quality of the existing book. The 16.6% credit-growth rate will determine how much risk is being accumulated for the next one.
