Overhang on inflation: will citizens withdraw money from banks en masse
The average deposit rate for individuals in Russia continues to fall rapidly. At the end of April, it dropped below 20% per annum for the first time in six months, and in early May it decreased by another 0.2 percentage points. Analysts believe that the decline will continue in the future. Meanwhile, in the long run, this means gradual withdrawal of private clients' funds from banks. Whether the removal of this "canopy" threatens a new surge in inflation and where the trillions accumulated in banks will go — in the Izvestia article.
In defiance of the Central Bank
By the end of the first decade of May, the average maximum deposit rate had dropped to 19.6%, the same as in October last year. Compared to the beginning of the year, the drop was almost two percentage points. At the same time, the dynamics of the decline has noticeably accelerated in the last month or two. On average, each decade "cut off" about 0.2 percentage points from the deposit rate.
All this happened under conditions when the Central Bank's key rate did not move. Normally, banks reduce interest rates when monetary policy is eased. But this is not our case.: The regulator refused to lower the key rate, although it admitted that this would be possible in the future with lower inflation. The latest figures on real weekly inflation (which dropped below 0.1%) and inflation expectations show that the pace of price growth in Russia is still slowing down. But not as fast as we would like, so real bank rates (the difference between deposit interest and inflation) are decreasing almost to the same extent as nominal ones.
In Russia, the popularity of bank deposits has broken all records since 2023. The total volume of term deposits has grown by 30 trillion rubles in less than two years, or by almost 80%. But this happened against the background of the fact that deposits have become by far the most profitable way of investing funds for the majority of citizens. No other financial instrument provided guaranteed (at least in the case of small deposits that were fully insured) returns in real terms of 10% per annum.
All this also coincided with the growth of household incomes — there was money that could be deposited in the bank. Moreover, people in Russia are relatively conservative from a financial point of view (relative, for example, to Americans) and like to save. But now both of these conditions stop working. Income growth slows along with the economy, and real rates decrease.
Will the bid drop to 16-17%
How fast will this happen next? Yuri Belikov, Managing Director of the Expert RA rating agency, noted that the market expects the start of a key rate reduction cycle in the second half of 2025. Although this drop will not be sharp, it is unlikely that anything will change this long-term trend.
— The most likely scenario is that the key rate will start to decrease in the summer and reach the level of 18-19% by the end of the year, — said Yuri Eydinov, Director of the Retail Business Department at Digital Bank. — Deposit rates will also continue to decrease gradually and may drop to 16-17% per annum by the end of the year. At the same time, rates for a period of one year or more will decrease faster than those for short-term deposits for a period of 3-6 months.
Igor Dodonov, an analyst at Finam Financial Group, expects that the first decline may occur sometime closer to autumn, and expects a smooth decline in interest on deposits. In his opinion, they may fall by another 0.5–1 percentage point in the next few months.
As rates decrease, the growth of deposits should also stop. Some of the deposits that expire will not be returned to term accounts. These expectations have provoked talk of a significant "overhang" of liquidity that could hit the economy if citizens carry this money taken from banks to shops and service facilities. And this, in turn, can nullify all the efforts made by the government in recent years to reduce inflation.
Most analysts, however, do not believe in such a scenario.
There will be no large-scale outflow
According to Belikov, the situation will not change dramatically, a large-scale outflow of public funds from the system should definitely not be expected, but the increase in deposits will slow down.
— In addition to interest rates, the increase will be limited to a reduction in the savings rate due to increased inflation. The problem of the "overhang" of individual deposits is largely far-fetched and greatly exaggerated. As the attractiveness of deposits decreases, the released funds will be used not only for consumption, but also for debt repayment, as well as for investments in stock instruments that want to be centrally stimulated. And inflation is accelerated not only by the consumer factor, but also by fundamental external causes that do not depend on the consumption rate. In the near term, it is likely to remain at levels significantly higher than the target, but it will not be further accelerated by money released from deposits.
Yuri Eydinov notes that the growth of household funds in banks slowed down in the first quarter.
— In the three months of 2025, the volume of ruble customer savings increased by 1.8%. For comparison, over the same period of 2024, the increase was 4.2%. With a sharp decrease in deposit rates, a significant portion of the funds can be used for consumption, including large purchases. Therefore, taking into account possible pro—inflationary risks, we expect a smooth reduction in the key rate, in which most of the population's funds will remain in deposits," the expert points out.
According to Igor Dodonov, the decrease in deposit rates will remain very gradual, and they will remain at an elevated level for a long time. Therefore, it is premature to talk about any significant outflow of public funds from deposits. Rather, the analyst notes, we will see a slowdown in the rate of inflows.
Real estate will accept the money
In turn, Vladislav Fadeev, director of Gazprombank's CEP, believes that the most likely is a transfer of funds to the real estate market, although not all of it.
— After lowering the key rate and deposit rates, it is inevitable that the savings of the population will partially transfer to other instruments of saving funds. Real estate is one of the classic and most understandable long—term instruments for the population, and given the general relatively low housing supply of our compatriots, the demand for apartments will continue and be satisfied, including through accumulated deposits," notes Fadeev.
According to him, a significant share of deposits consists of the savings of those who do not have an acute housing problem, as well as those who have an amount on deposits that is insufficient to purchase an apartment.
— For this reason, not all the influx of deposits that we have seen in the last two years will come to the real estate market. But this is indeed the main factor in the future growth of demand in this market. Another aspect will be the revival of mortgage lending, but it will begin only after the return of market mortgage rates to the levels of 12-14%, — summed up the interlocutor of Izvestia.
Igor Dodonov believes that the problem of the "overhang" of deposits is somewhat exaggerated.
— It is worth noting the strong stratification of bank deposits in the Russian Federation. According to the DIA, at the end of 2024, almost two-thirds of all deposits accounted for deposits of 1.4 million rubles and above, while it was in these categories that the most significant increase was observed last year. Meanwhile, the number of depositors with a deposit amount of 1.4 billion rubles and above was only 2.8% of all depositors, the expert recalls.
Thus, it turns out that the vast majority of bank deposits in the country belong to a small group of very wealthy citizens, the Izvestia interlocutor noted.
— When these citizens eventually start withdrawing their funds from banks against the background of lower deposit rates, this money is unlikely to flow into the consumer market in large quantities, that is, relatively speaking, it will be used to buy potatoes, sausage or refrigerators. Rather, this money will flow into stock market instruments, the real estate market, precious metals, (crypto)currencies, and the like," Dodonov believes.
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