The Central Bank of Russian Federation has poured record amount of cash into the economy
Because of the pandemic and an oncoming crisis the demand for cash in Russia has increased. According to the statistics of the Central Bank, since the beginning of March the money supply has grown by almost a trillion rubles.
The growth in cash in circulation traditionally occurs in December, when citizens receive the 13th salary and spend it very fast. In the rest of the year the mass of the cash usually does not change by more than 400 billion per month. However, in 2020, cash growth reached 1.1 trillion rubles since the beginning of February, and thus exceeded "the historical norm many times", the Finanz quotes Sberbank analysts.
The Central Bank notes that from March 15 to 25, individuals took about 616 billion rubles from their accounts. - that is, 2% of all deposits. When Russian President Vladimir Putin announced the introduction of a tax on interest income on deposits, the flight of depositors grew so much that the Association of Banks of Russia was seriously excited. The ADB, which unites more than 300 credit organizations, has been sounding the alarm that “the absence in the public space of comments explaining the procedure, terms and information about the payers of this tax created the ground for the dissemination of various versions and rumors of its implementation.”
“This can provoke a “raid” on banks, the first signs of which are already visible”, the banks warned in a letter sent to the head of the Bank of Russia Elvira Nabiullina.
Later, a weekend regime was introduced in the country, lasting for a whole month - the closure of bank branches helped to stop the outflow of cash from depositors' accounts. According to the regulator, during the last March week there was even a growth of deposits by 0.5% - about 150 billion rubles.
According to indirect data, in April the situation could worsen, as the amount of cash in circulation again increased by 200 billion rubles.
“We don’t know yet whether these funds settled in the banks' cash desks or entered the economy,” said analysts at Sberbank’s Central Research Institute.
Experts believe that the scenario of 2014 may repeat when the demand for cash comes from the banks themselves, which filled the cash desks in case of these “raids”.
In any case, the demand for "cache" is a traditional crisis companion. It is possible that citizens decided to “keep” the money closer for the period of self-isolation. FxPro analysts also point out that cash may be needed due to falling revenues.
We have to recall that the head of the Accounts Chamber Alexei Kudrin predicted a banking crisis in three months. State assistance to Russian banks may be needed due to a sharp deterioration in the situation of business and consumers, who will have difficulty in repaying loans.
Meanwhile, money are leaving Russia. For the first week of March, investors withdrew 15.4 billion rubles from the country. Prashant Nevnaha, a senior strategist at TD Securites in Singapore, described the situation on the global market as a “crazy cash race”.