"Lower reference interest rate for cheaper loans"

"Lower reference interest rate for cheaper loans"

Banks must understand that they must start providing loans for production, clients and business plans, said Tabakovic.

For years, banks have engaged in trading securities at a safe interest rate, which is not a sustainable operating model, so now it is not easy to make them increase lending to businesses, the NBS governor said at a meeting of the Serbian parliament's Finance Committee.

The citizens have already felt the benefits of several reductions of the reference interest rate, but not to a sufficient degree, Tabakovic said, specifying that dinar loans were now available at an effective interest rate of around 15 percent, compared to approx. 22 percent last year.

By cutting the reference interest rate to five percent, the NBS intended to bring down the banks' interest rates and increase lending, consumption and investments, as the main drivers of the economic growth.

According to the governor, the National Bank of Serbia (NBS) managed to preserve stable and low inflation and ensure exchange rate stability.

The inflation rate totaled 2 per cent over the past two years and onset of deflation was prevented, Tabakovic said during a sitting of the Serbian parliament's Finance Committee. She said that key policy rate totaled 8 per cent and fiscal consolidation measures created room for monetary policy relaxation, which is why the key policy rate now totals 5 per cent.

Presenting the reports on NBS operation in 2014, Tabakovic noted that the central bank made interventions on the inter-bank foreign exchange market last year by purchasing EUR 260 million and selling EUR 1.8 billion. She noted that the finance sector is stable and highly solvent, while the banking sector is recording positive results.

She noted that NBS profit in 2014 totaled RSD 80.8 billion upon subtraction of taxes, while the highest revenues were realized based on exchange rate differences.

Nevertheless, as the results of operative actions are obtained through exclusion of positive exchange rate differences, NBS losses in 2014 totaled RSD 2.45 billion, relative to over RSD 17 million recorded in 2013, Tabakovic said.

The parliament Committee on Finance adopted 11 reports, programs and plans for 2014 and 2015, including the NBS Monetary Policy Program and Financial Plan for 2015.