* This content was produced in Russia where the law restricts coverage of Russian military operations in Ukraine

MOSCOW, July 19 (Reuters) - Russia's largest lenders Sberbank and VTB, both under Western sanctions, said on Tuesday their retail loan portfolio rose sharply in June thanks to lower interest rates and as the economic situation stabilizes.

Retail lending in Russia took a hit from the central bank's emergency rate hike to 20% days after Moscow sent tens of thousands of troops into Ukraine on Feb. 24, prompting the West to impose sweeping economic and financial sanctions.

The central bank has cut its key interest rate three times since then, and is expected to lower it further from 9.5% at Friday's board meeting.

Russia's top lender, Sberbank, said the volume of retail loans it issued in June rose to 144 billion roubles ($2.57 billion) from 67 billion roubles in May and is on track to increase by another 20% in July.

VTB said it provided its clients with nearly 130 billion roubles worth of retail loans in June, around 50% more than in the preceding month.

"Stabilization of the economic situation has avoided a prolonged stagnation of the lending market," VTB's Deputy Chairman Anatoly Pechatnikov said in an interview with Rossiya24 TV channel.

"The bank forecasts further growth in demand, taking into account the seasonal factor and lower interest rates on loans to individuals. At the same time, it is still premature to expect credit activity of Russians to recover to the level of 2021."

(Reporting by Reuters; Editing by Sandra Maler)