As fighting approaches Russian territory, households are increasingly holding
cash, reversing a multi-year decline in cash use. Data from the Russian central
bank show cash circulation outside the banking system rose by 2.1 trillion
rubles (~$25bn) in the first seven months of the year, the largest year-to-date
increase since the war began; cash’s share of the money supply has stopped
falling and edged up. Sberbank, Russia’s largest bank, is concerned because it
has long relied on a large low-cost deposit base to fund lending and support
margins. The development so far does not reflect deposit withdrawals — bank
deposits have not fallen — but the pace of net inflows into the banking system
is slowing as more households prefer holding cash.
