A little more than six months ago, the National Bank of Serbia shortened the deadline for approving cash loans from up to 10 years, as banks in practice approved to eight years in 2019, then from this year to seven, and from next year to six years by forcing banks to reduces its capital by the amount of the outstanding part of the loan that has been approved for a longer period than prescribed.
The day before yesterday, NBS put that decision ad act. Now, the NBS is telling the banks that they can extend the maturities of loans, while their business indicators will not suffer.
“We emphasize that by stimulating the approval of facilitated loan repayment terms to the population, the National Bank of Serbia does not deviate from encouraging the practice of sustainable lending and preventing the granting of non-purpose loans to households for terms that are not in line with the risk of this type of product. Also, in this way, the risks of growth of the rate of problem loans in this segment of lending in the period after the moratorium expires, contributes to mitigating the consequences of the crisis in this and next year and creates conditions for creating additional consumption of individuals,” reads the bank’s explanation.
This is a completely reliable signal that the bureaucracy is expecting a hot autumn, as recently announced by the trade unions, in which 300,000 people could lose their jobs.
Economist Milan Kovacevic reminds that the collection of loans with a moratorium has been postponed for three months, but after that it is no easier to repay loans to banks.
“At the same time, the banks will add interest from the previous three months on the remaining debt and thus increase the installments. It was a tactical, not a strategic move. Until now, the crises were of a financial nature, and now we have a change of lifestyle with consequences for the economy. It is certain that problem loans will grow in the coming period. The economy can repay loans either from depreciation or from profits, and both will decrease. As for the population, a large number of citizens will lose their jobs. It was necessary to make a plan of what to do with both banks and citizens if problem loans increase. We needed to understand that the decline would be great and would last a long time. Instead, because of the elections, the state acted as if it had a jar with the money it shared,” Kovacevic estimates.
The decision of the National Bank refers to cash, consumer and other loans, ie to everything except housing and current account deficits. According to the statistics of the National Bank, at the end of May, the citizens owed almost five billion euros on the basis of these loans, where cash loans dominate with about 4.2 billion euros. Not so long ago, the NBS saw the approval of these loans for 10 years as a risk for the banking system, but now in times of crisis the risk is a potential impossibility to repay them, so the NBS is trying to persuade banks to ease credit indebtedness to debtors.
“The NBS did what it could, it gave the banks the opportunity to refinance or extend the loan repayment period, and it remains to be seen whether the banks will accept that,” said Nebojsa Savic, a professor at FEFA University.
In addition to extending the repayment period, the NBS also relaxed the request for participation of loans in the total income of debtors. Last year, it determined that the loan installment could be a maximum of 60 percent of the salary or pension, but now the banks are left to reschedule cash loans to debtors even if they transfer 60 percent of income. These measures refer to loans approved by March 18 this year.
Dusan Uzelac, editor of the Kamatica portal, believes that something similar could have been expected.
“Extending the loan repayment period is a defense mechanism. Credit indebtedness is managed by economic activity, and that is questionable even a few weeks in advance. The question is how many people are not employed, how many will not have the salaries they expected, and these are all citizens who have loans,” said Uzelac, commenting that this measure is intended to help citizens, while the previous measure to reduce participation for housing loans is more was aimed at helping the construction industry, Danas reports.