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. Last Updated: 07/27/2016

Sberbank Rejects Yeltsin Proposal

A recent plan floated by President Boris Yeltsin to compensate pensioners' inflation-struck savings by not redenominating their bank accounts along with the rest of the country next year was characterized as "noble" but unworkable Tuesday by Sberbank's top officer.


According to Andrei Kazmin, president of Russia's top savings bank Sberbank, Yeltsin proposed about three weeks ago to use a planned redenomination of the ruble -- dropping three zeros from the currency, turning 1,000 rubles into 1 ruble -- as an opportunity to set things straight.


Millions of pensioners' savings were erased by rampant inflation in 1991 and 1992 and have yet to be compensated as promised.


Under such a plan, 4,000 rubles in savings currently in a bank account, valued today at about 68 cents, would have a value at today's rates of $681.54 after redenomination.


Deposits held by pensioners that are liable for compensation amounted to 317 billion rubles ($54 million) as of Jan. 1, 1997, Kazmin said. If the funds were not redenominated, these accounts would jump in value to 317 trillion rubles, he said.


The figure is almost equal to budget revenues for 1997, Kazmin said.


Kazmin called Yeltsin's plan a "noble idea," but said it would be impossible to follow it through.


"If we want to establish a mission to minimize the negative psychological effects of denomination ... we technically need to index [all accounts] a thousand times," Kazmin said at an interview with the Ekho Moskvy radio station. "No one country can solve such a problem."


Instead, Kazmin said Sberbank wants to use a method it has developed by which savings account holders are separated by age groups. The bank has already paid out to people older than 80 and now proposes lowering the age to 76, with other age categories gradually phased in over 25 to 30 years.


Unlike the earlier scheme, direct descendants of deceased account holders would also be able to claim compensation.


Kazmin also said Sberbank will not reduce personal deposits interest rates before the end of the year despite the Central Bank's lowering its refinancing rate from 24 to 21 percent beginning Monday.


Sberbank had already lowered its rates, beginning Sept. 25, to 11 percent annual on six-month deposits.