July's Record Cash Surge: A 643 Billion Ruble Move Out of Banks
Russians and businesses withdrew a record 643.4 billion rubles in cash during July — a 43.1% jump from June and the largest monthly increase of 2023, according to central bank data. Since February, more than 2.5 trillion rubles have left the banking system entirely. The structural liquidity deficit of banks simultaneously hit its widest point since spring 2022, topping 2 trillion rubles.
The scale of outflows has forced the Bank of Russia to revise its year-end forecast for the deficit to between 2.4 and 3.6 trillion rubles. Yet the central bank and independent analysts insist there is no systemic panic: the sums represent only about 1% of total household deposits (67.6 trillion rubles), and the overwhelming majority of money remains digital.
Three converging trends explain the shift: increasingly frequent mobile internet outages that make card payments impossible, a sharp rise in the cost of accepting card payments for businesses, and a seasonal surge in foreign-currency demand during the summer holidays. Together, they have pushed the share of cash payments in Russia to 30.2%, a notable climb from previous lows.
Why Russians and Businesses Are Fleeing to Physical Money
Digital Payment Fears and Mobile Internet Disruptions
The central bank notes that households are building a reserve of physical money explicitly to guard against failures in digital infrastructure. Since spring 2025, localised mobile internet restrictions have become more common in Russian regions, leaving cash as the only reliable payment method during outages. Professor Nikolai Kuznetsov of the State University of Management cites the 30.2% cash-payment share as direct evidence of this behavioural shift.
The 22% VAT on Acquiring and Business’s Flight to Cash
From 2026, bank acquiring services are subject to VAT at 22%, dramatically raising the cost of accepting card payments for retailers. Kuznetsov observes that businesses are “going into cash” and routing transactions outside official tills to minimise their tax burden. This shadow-economy response is a structural driver of cash demand that goes beyond seasonality.
Seasonal Currency Demand and the Weakening Ruble
A simultaneous depreciation of the ruble and lower deposit rates triggered a rush to exchange offices. The summer holiday season amplified the effect, as travellers stockpiled foreign currency. Together with the digital and tax-related drivers, this created the July spike.
What the Liquidity Deficit Means for Banks
The near-quadrupling of the structural deficit since the start of the year — from 0.6 to 2.5 trillion rubles — does not mean money has vanished. Magomed Gamzaev, director of financial product development at Sravni, explains that funds merely shifted form, forcing banks to hold larger note inventories in branches and ATMs. While the deficit can be benign during periods of strong lending, the current slowdown in credit growth and tighter funding conditions add pressure. Nevertheless, the central bank is providing ample liquidity, and experts stress that only a sustained, broad-based flight from deposits would threaten funding stability — a scenario not yet in sight.
How Much Cash to Keep at Home — Expert Advice
With the current environment of intermittent digital outages and rising business preference for cash, experts recommend keeping a modest emergency cash reserve at home. The sum should cover one to two weeks of ordinary expenses — enough for groceries, medicines, transport, and small daily payments. Use small-denomination notes for convenience.
Do not treat the cash reserve as a replacement for bank savings. Money kept at home earns no interest and loses purchasing power to inflation. Bank deposits remain protected by the deposit insurance system and generate income. As Gamzaev puts it, “converting all your savings into cash is irrational.” The goal is a practical buffer against temporary digital failures, not a retreat from the financial system.
Risk & Opportunity Assessment
| Commercial Risk | Medium | A structural liquidity deficit above 2 trillion rubles raises banks' funding costs and forces them to hold larger cash inventories, squeezing margins at a time of slower lending. |
| Competitive Risk | Low | The shift affects all major banks similarly; no single institution is disproportionately exposed to the cash-versus-digital shift. |
| Regulatory Risk | Medium | The 22% VAT on acquiring has pushed business transactions into cash and outside the tax net, potentially reducing fiscal revenues and inviting further regulatory tightening. |
| Reputation Risk | Low | The public's move to cash reflects practical responses to outages and taxes, not a loss of confidence in banks; the central bank's communication reinforces systemic stability. |
| Technology Disruption | Medium | Repeated mobile internet restrictions are eroding trust in digital payment rails, potentially reversing years of progress toward a cashless economy if outages become chronic. |
| Commercial Opportunity | Low | Banks may see a short-term boost in fee income from ATM usage and foreign exchange, but the broader trend toward cash limits the growth of higher-margin digital services. |
Comments 0