Russians hoard record US$500 billion in banks lured by high rates

[MOSCOW] Russian households have amassed a record amount of bank deposits as they take advantage of historically high interest rates for savings accounts in the wartime economy. 

Deposits held by individuals grew 8 per cent in the first seven months of the year to reach US$542 billion, according to Bank of Russia data published on Tuesday (Aug 26). In total, Russians now hold 61.1 trillion rubles (S$978.5 billion) in deposits and accounts.

The deposits market boomed over the past two years as the central bank raised the key rate to a record 21 per cent to contain inflation in Russia’s overheating economy. Massive state spending on the military and to support the sanctioned economy propelled consumer-price growth to more than double the 4 per cent target, with signs of a slowdown only emerging in June.

While the record stockpile – nearly twice the amount of Russian central bank assets frozen abroad in the wake of the February 2022 invasion of Ukraine – highlights the appeal of high returns, it also marks a dramatic shift in attitudes toward bank deposits from the turbulent 1990s, when many Russians saw their savings wiped out more than once. The trauma of the post-Soviet decades still lingers, and rumours about state plans to freeze deposits surface from time to time, prompting central bank officials to explicitly deny such intentions. 

When Russia launched its war on Ukraine, panicked depositors rushed to withdraw cash. The central bank moved quickly to stabilise the situation, imposing capital controls and briefly hiking its key interest rate to 20 per cent in an emergency step that helped stem the outflow.

The central bank began raising rates again in 2023 to curb accelerating inflation. The extended period of high interest rates and competition among banks for funding has led to a doubling of retail deposits since the start of the war, Bloomberg calculations based on central bank data show.

The inflows have persisted even as the Bank of Russia started monetary easing amid slowing inflation and concerns that tight policy could push the economy into recession. It lowered the benchmark rate at the last two meetings by a combined 300 basis points to 18 per cent, while central bank data show that the maximum deposit rate at the country’s 10 largest banks has declined to 15.8 per cent.

Ruble deposits ranked among the top three most profitable local investments since the start of the war, returning almost 44 per cent to households as of July. This year, they remain in the top 10 with a 14 per cent yield.

Interest earned on deposits now covers as much as 10 per cent of households’ annual spending, Tass cited Dmitry Breitenbicher, a board member with VTB Bank PJSC, as saying at the St Petersburg International Economic Forum in June. The state-run lender estimated households’ deposit income at 4 trillion rubles in the first half of 2025, 1.5 times more than a year earlier, the news service reported. 

While deposits have reached a record, Russians have also amassed 36.8 trillion rubles in debt, according to the Bank of Russia.

Corporate deposits resumed growth in July after shrinking in previous months, reaching 36.9 trillion rubles, the data show. The total now stands at about 70 per cent above the pre-war level.

Still, the high policy rate and tighter banking regulation imposed by governor Elvira Nabiullina to address financial stability risks have hit the sector this year. Growth in overall loan portfolios has slowed, while retail lending has stalled.

The share of problem loans in the retail segment continued to rise, reaching 6 per cent. According to the central bank, overdue payments are emerging on unsecured consumer loans that were issued at high rates.

The bank has urged lenders to focus on rebuilding capital buffers as the boom times fade. Officials also are drafting measures to strengthen management incentives for maintaining stability, the central bank said this week. 

Russians bought a record amount of gold last year, acquiring the equivalent of about a quarter of the country’s annual output. However, bank deposits remain the more popular choice due to their ease of use and state insurance.

Banks earned 2.1 trillion rubles in net income in the first seven months of the year, matching the result in the same period of 2024. BLOOMBERG