In the recent years, interest rates have been in decrease. However, since the reversal in lending interest rate trends in Croatia a year ago, the causes of their growth are not well understood: is it the regulatory cost, bank profit rate, global interest rates or cost of funds on the domestic deposit market? This analysis shows that incoming costs of banks have been growing for more than two years already. In lack of another reference rate, we propose Cost of Funds Index (COFI). By following COFI, the trends of all significant incoming costs of the banking sources of funds may be monitored and understood.