Russians are emptying their bank accounts because they have to use their savings to live during the pandemic, Izvestia reports.
According to the Central Bank, the outflow of clients from credit institutions has doubled compared to last year. The total amount in Russians’ bank deposits at the beginning of this year was RUR 30.55 trn ($420 bln). In the last two months, since the crisis began, Russians have cashed more than RUR 1 trn ($13.7 bln) – 700 bln rubles in March and more than 300 bln in April 2020.
However, these statistics do not suggest the outflow from deposits has reached a serious scale, says Artyom Deyev, head of analytics at AMarkets.
“This client behavior is quite natural and understandable. In March, with the depreciation of the ruble, Russians wisely expected an even greater weakening of the national currency, as it often happened before,” the expert explains. “In April, they needed more cash when the lockdown was announced – they used the money to stockpile non-perishable foodstuffs, and to create financial safety nets as they transitioned to telework or faced lower incomes, etc. Some people used the funds to purchase property as a protective asset against inflation (the demand for real estate increased significantly at the end of March).”
It is absolutely logical that people would continue to withdraw money from bank accounts in a situation of uncertainty caused by the coronavirus outbreak and lockdown orders. The Central Bank does not see this as a serious problem either.
At the same time, banks have already asked the regulator to provide them with additional funds to maintain liquidity. Financial institutions need more money to back their lending operations, both retail and corporate, Artyom Deyev noted.
Pavel Sigal, First Vice President of Opora Russia SME association, also believes that so far, the situation does not look critical. The bulk of the outflow from bank deposits happened in March and April 2020 when ‘non-working’ days were introduced to prevent the spread of COVID-19. Most people use banks to keep the money they have saved for a rainy day, and they put that money to use with the onset of the crisis.
People began to stockpile food (as they were not at all certain that the pandemic would end soon and grocery stores would provide uninterrupted supplies) and equipment they needed for work (its prices began rising with the declining ruble exchange rate). Some invested part of their money in real estate , in particular in buying dachas – a popular way to protect ones’ savings in the current crisis, the expert notes.
“Another reason why people began to withdraw their money from banks was the concern that payment systems might fail, while cash can always be used,” Pavel Sigal explains. “And their last reason was that bank deposits were no longer profitable (the Central Bank lowered its key rate dramatically this year, and interest on deposits decreased accordingly, although some banks still offered their usual rates to prevent an outflow of liquidity). Russians have cashed more than RUR 1 trn out of 30 plus trn they had in their bank accounts as of January 1. Gradually, as the crisis begins to recede, the money will return to banks, to salary plans as well as private deposits.”