Households in Russia have accumulated a record amount of bank deposits, taking advantage of historically high rates on savings accounts. Bloomberg reports this.
Household deposits in the first seven months of the year increased by 8% and reached 43.6 trillion rubles ($542 billion), according to data published by the Bank of Russia on Tuesday. In total, Russians now have 61.1 trillion rubles in deposits and accounts.
The deposit market has been booming for the past two years as the Central Bank raised the key rate to a record 21% to curb inflation in an overheated economy.
Massive government expenditures to support the economy under sanctions have driven consumer price growth more than twice the target level of 4%; signs of a slowdown only appeared in June.
Record amounts — almost twice the assets of the Central Bank of Russia frozen abroad since the conflict began in February 2022 — highlight the attractiveness of high yields and simultaneously indicate a sharp change in attitude towards deposits compared to the turbulent 1990s when many Russians repeatedly lost their savings.
In 2022, depositors panicked and rushed for cash. The Central Bank quickly stabilized the situation by introducing currency restrictions and urgently raising the key rate to 20%, which helped stop the outflow.
Since 2023, the regulator has resumed raising rates to contain accelerating inflation. A prolonged period of high rates and bank competition for funding has led to a doubling of retail deposits over the past three years, according to Bloomberg calculations based on Central Bank data.
Inflows continued even after the Bank of Russia began to ease policy amid slowing inflation and concerns that tough conditions could push the economy into recession.
In the last two meetings, the key rate was reduced by a total of 300 basis points to 18%, while the maximum deposit rate in the top 10 banks fell to 15.8%, according to Central Bank data.
Ruble deposits have entered the top three most profitable local investments, bringing households nearly 44% by July. This year, they remain in the top 10 with a yield of about 14%.
Corporate deposits resumed growth in July after declining in previous months and reached 36.9 trillion rubles. Overall, this is approximately 70% higher than the level recorded before 2022.