New tax will not lead to account freezes – Finance Minister

Credit: Alexandr Astafiev | RIAN

The government has no plans to freeze or convert bank deposits, Finance Minister Anton Siluanov said in an interview with Vedomosti.

He made the reassurance in response to concerns that Russians may rush to withdraw their cash and move it to piggy banks over fears associated with the new tax on income earned from bank deposits and securities.

The law levying a 13% tax on the total interest accrued on individual deposits in Russian banks will not take effect until January 1, 2021, so we still have at least six months ahead, and the situation can change several times over that period, Artyom Deyev, head of analytics at AMarkets, said.

“Indeed, many Russians are cashing their savings now. There may be several reasons for that. In addition to the new tax concerns, the Central Bank has also cut its key rate, so banks have reduced interest on deposits accordingly. Keeping money in banks has become less profitable. There is one more valid reason – some investors have lost their jobs or lost part of their income, and they are compensating for these losses by withdrawing their savings from banks,” the analyst explained.

In his opinion, if this trend continues, banks can hedge themselves against liquidity problems by temporarily raising or maintaining their current interest rates.

People may prefer having more cash at home as long as the lockdown orders are in effect, but when the restrictions are relaxed and the economy begins to recover, Russians will probably opt for returning their money to banks for lack of a better alternative, Deyev predicts. Bank deposits do not generate high revenues, but can at least mitigate the impact of inflation.

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