Russian banks raise deposit rates to combat liquidity shortage

Russian banks are facing a liquidity shortage driven by a surge in cash withdrawals, forcing lenders to raise deposit rates to attract funding amid growing demand for loans. While the banking system remains stable, analysts warn of potential risks to capital and loan portfolio quality. Cash Demand and Liquidity Pressure Liquidity levels within the banking system have dropped to lows not seen since March 2022. The primary driver of this trend is the preference of both households and businesses for cash over digital balances. According to regulator data, approximately 2.4 trillion rubles have been withdrawn from the system so far this year. This scarcity of resources has triggered competitive bidding among banks, which are increasing yields on deposits to secure the necessary funding.