Russians are withdrawing large amounts of cash from banks

Russia has seen an outflow of funds from banks into cash for the eighth consecutive month. From September 1 to 24, the amount of cash in circulation increased by another 386.3 billion rubles, according to preliminary data from the Central Bank of the Russian Federation.

 

In August, the public withdrew 434 billion rubles in cash from banks, and in July, the figure reached a record high for the year of 620 billion rubles.

Overall, from February through September, the volume of cash in circulation in Russia increased by 2.9 trillion rubles. According to the Central Bank of Russia’s forecast, the increase could reach 3.7 trillion rubles by the end of the year.

Vladimir Verkhoshinsky, Chief Executive Officer of Alfa-Bank, attributes the demand for cash, in particular, to changes in tax policy.

“We’ve seen that over the past six months, people have started withdrawing money from their deposits as cash. In our view, the main problem isn’t liquidity. It’s that the tax changes that have taken place, on the one hand, have positively boosted the budget, but on the other hand, are pushing the population into the shadow economy. Roughly half a trillion rubles a month—rounded off—the population has been withdrawing from deposits and taking out in cash since the beginning of the year,” he said.

Alexandra Prokopenko, a research fellow at the Carnegie Berlin Center for the Study of Russia and Eurasia, believes that the situation also reflects growing fear in Russian society and distrust of the banking system.

According to her, one of the reasons may be the fear that the state will interfere with the banking system or nationalize deposits. At the same time, Prokopenko calls such a scenario unlikely, although she does not rule out possible restrictions on cash withdrawals.

Against the backdrop of rising cash volumes, the Central Bank of the Russian Federation is tightening control over transactions. Starting in May, banks must more thoroughly vet customers who frequently deposit cash into their accounts—specifically, deposits of 5 million rubles or more within 30 days, or 10 or more transactions totaling more than 100,000 rubles each.

In the near future, banks may also receive instructions to tighten controls on the origin of cash funds.

As a reminder, the number of bankruptcies among construction companies in Russia has risen sharply.

Following the elections in Russia, there has been talk of new taxes and rising costs for the population.

The new composition of the Russian State Duma will include 46 participants in the war against Ukraine. This represents 10.2% of the total number of deputies in the lower house of the Russian parliament.