Russian Deposit Insurance Agency says rouble deposits boosted by rate hikes

MOSCOW (Reuters) – A series of Russian central bank rate hikes has boosted household demand for ruble-denominated deposits that could draw more money from foreign exchange accounts, said Yuri Isaev, head of the Deposit Insurance Agency (DIA). She said.

The Bank of Russia has raised its key interest rate six times so far this year, bringing it up from a record low of 4.25%, as it tried to curb high inflation that is expected to prompt another rate hike in December.

In an interview with Reuters, Izev said that retail deposits in Russia grew by 4.2 percent in 2020, compared with 9.7 percent a year ago, when interest rates were low as Russia grappled with the first wave of the Covid-19 pandemic.

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In the twelve months to October 1, retail deposits with banks grew 4.8%, according to the DIA, which Russia set up to pay deposits in the event of a bank bankruptcy.

“Interest on term deposits is on the rise again with higher interest rates,” said Isaev, who is also the president of the International Association of Deposit Insurance Companies (IADI).

The central bank said this week that it would consider raising the key rate by 100 basis points to 8.5% among other options at its December 17 board meeting, a move that would increase the attractiveness of ruble deposits. Read more

The central bank said banks had 32.85 trillion rubles ($445.6 billion) in retail deposits as of November 1, just over 20% in foreign currencies.

Russia intensified its efforts to reduce the share of non-ruble assets in the economy to ensure macro stability during turbulent financial markets after the West imposed sanctions on Moscow for the annexation of Crimea from Ukraine in 2014.

The share of foreign-currency deposits has shrunk from 30% in 2016 because Russian deposit rates are higher than the near-zero foreign-currency deposit rates, Izev said, adding that it is likely to drop further to 15%.

“But it’s not likely to go down.”

(1 dollar = 73.7240 rubles)

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(Andrei Ostroch reports). Editing by Barbara Lewis

Our Standards: Thomson Reuters Trust Principles.

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