The class 740 consisted of 40 diesel locomotives which had been developed to replace steam locomotives on narrow gauge lines. They had been built between 1968 and 1972 by Đuro Đaković with 600 hp engines built under license from SACM. Although primarily intended for freight service, 25 of the 40 locomotives had received a steam heating boiler for occasional passenger service. They even had to run on rack lines, while relying purely on adhesion.

However, many narrow gauge lines were closed in the seventies and by 1982, virtually all had gone. So the class 740 had a very short service life in Yugoslavia and now a number were sold to other operators on the Balkans, in Austria, Italy and Spain. There nearly all received new engines and some were rebuilt to metre gauge or 900 mm gauge. Some are still operational, for example on the Banovići coal railway and on the Steiermärkische Landesbahn.