NEWS
Russians Pull Record Amounts of Cash From Banks Amid Fears of Deposit Raids and Growing War Anxiety
…says They Fear, President Putin Could Seize Deposit
Russians are withdrawing record amounts of cash from the country’s banks as fears grow that the Kremlin could eventually target private deposits to help finance its costly war in Ukraine.
The growing rush for physical cash comes amid increasing economic uncertainty, persistent inflation, Ukrainian drone attacks on key Russian infrastructure and widespread concerns about possible restrictions on access to money held in banks.
Central bank data showed that during the first two weeks of August alone, the volume of cash circulating in Russia increased by 286.4 billion roubles, equivalent to about £2.5 billion. The development marked the seventh consecutive month of cash flowing out of the Russian banking system.
Every working day in August has reportedly seen banks lose cash, with the largest single-day outflow of 56.8 billion roubles recorded on August 12.
The latest withdrawals followed an even bigger outpouring in July, when Russians pulled more than 620 billion roubles from banks. Since the beginning of the year, the total amount withdrawn has reached 2.4 trillion roubles.
That figure is higher than the two trillion roubles withdrawn during the first year of Russia’s full-scale invasion of Ukraine in 2022, when panic initially drove households and businesses to rush for cash.
Analysts and insiders believe the sudden shift in behaviour is being fuelled by a combination of war-related anxiety and growing distrust of the country’s financial system. Ukrainian forces have continued launching long-range drone strikes against Russian oil refineries and other strategic economic targets, bringing the consequences of the war closer to ordinary Russians.
“Drones are flying. Things are burning down. Nervousness is growing. And people’s everyday wisdom may be kicking in that they need to have cash under their pillow and not somewhere in banks where it may never be returned,” a former finance official told The Washington Post.
The heavy demand for physical cash is also placing additional pressure on Russia’s banking sector. The withdrawals have reduced the amount of rouble liquidity available to banks, forcing the Central Bank of Russia to increase lending to the financial system.
According to Russian outlet RBC, the country’s rouble liquidity deficit has reached its highest level since March 2022. The shortage has reportedly left some banks with limited cash available to buy government bonds, potentially creating fresh complications for the state’s borrowing and financing operations.
Earlier this year, rumours circulated widely on Russian Telegram channels claiming that authorities were preparing to freeze citizens’ bank deposits.
Russian Finance Minister Anton Siluanov dismissed the reports as “fake news”, while economic analysts argued that such a drastic move remained highly unlikely.
Nevertheless, the rumours appear to have added to public anxiety, particularly as the Kremlin has introduced other measures that have made electronic payments less dependable.
The shutdown of mobile internet across large parts of Russia has prevented many people from using banking applications and payment cards, creating an immediate practical need for cash.
Tax increases, stubborn inflation and tougher government scrutiny of financial transactions are also believed to be contributing to the growing preference for physical money.
“It took Russia less than a decade to become one of the world’s leaders in cashless payments,” The Bell, an independent Russian economic publication, said earlier this year.
“Now, because of the actions of the Russian authorities, Russians are increasingly turning to cash: higher taxes are hitting businesses, while internet shutdowns are making cashless payments unreliable.”
The growing financial unease is not limited to ordinary Russians.
Large companies are also reportedly moving money abroad in an effort to protect assets from potential seizure by Russian regulators. During the second quarter of the year, an estimated 800 billion roubles was withdrawn from the country.
Russia’s billionaire elite is said to be increasingly concerned about the Kremlin’s sweeping nationalisation campaign, which has transferred trillions of roubles worth of assets into state control. Ukraine’s continued strikes on Russian enterprises and economic infrastructure have further heightened fears about the security of private assets.
Yet, despite the pressure on the economy, President Vladimir Putin has also received a financial boost from wealthy Russian businessmen.
His efforts to secure “donations” from oligarchs to support the country’s struggling war economy reportedly brought hundreds of billions of roubles into the federal budget by mid-August, according to Moscow-based business daily Vedomosti.
Meanwhile, public confidence in the Russian economy has fallen sharply. A survey published by a polling agency in June found that 60 per cent of Russians believed economic conditions in the country were deteriorating, pushing optimism about the economy to a record low.
The worsening economic outlook has also reportedly triggered tension within Russia’s political and financial establishment.
At the weekend, Putin sacked the chief economist of Russia’s second-largest bank after Russian media reported that he had made critical remarks about the state of the economy and suggested Moscow could lose a “war of attrition” against Ukraine.
The Bell reported that Andrei Klepach, who had occupied the position since 2014, was dismissed on orders from the Kremlin after authorities became aware of a speech he delivered in May.
The developments paint a picture of an increasingly anxious Russia, where the effects of the prolonged war are no longer confined to the battlefield. As drone attacks intensify, economic pressures mount and confidence in the financial system weakens, more Russians appear to be taking a simple precaution: keeping their money where they can physically see it.