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. Last Updated: 07/27/2016

Personal Savings Deposits Soar 57%

Russian depositors encouraged by low, stable inflation rates sharply increased their savings in personal bank accounts in 1996, with state-owned savings bank Sberbank taking the lion's share.


Personal deposits in all Russian banks rose 57 percent to 117.7 trillion rubles ($20.9 billion) in 1996, a substantial real increase since inflation was only 21.8 percent.


Sberbank led the way -- its personal deposits rose 69 percent in 1996 to 87 trillion rubles.


Russians, whose tendency to keep their savings "under the mattress" in the form of dollar bills has grown almost legendary, appear swayed by government efforts last year to stabilize the ruble-dollar exchange rate and curb inflation, analysts said.


"People are progressively realizing that it is just more practical and safer to keep their money in a bank account than at home," said Mike Flood, a banking analyst at Coopers & Lybrand.


Inflation, which erodes the real value of bank deposits, fell from 131 percent in 1995 and the budget predicts inflation at 1 percent per month.


But where falling inflation and a more solid ruble have bolstered depositors' confidence, a spate of bank failures during the past 18 months has had the reverse affect, according to Flood.


The result, say analysts, is that Sberbank stands tall among its competitors as the only Russian bank in which deposits are guaranteed by the state.


"Those scared by last year's bankruptcies [such as Credo Bank and Tveruniversal] will naturally be inclined to place their money in a state bank than in others," said Joel Bismuth, vice president of Unibest Bank.


Also, Sberbank offers more branches than any other bank -- 40,000 across Russia. Said Bismuth, "Everyone has a Sberbank next to his house."


With the benefit of size, reputation and exclusive state guarantees, Sberbank is able to attract a majority of clients despite offering lower interest rates than other leading commercial banks.


Annual interest rates at MOST-Bank range from 35 percent to 37 percent on ruble deposits, depending on account size, bank officials said.


Inkombank currently offers rates of 32 to 38 percent, said Sergei Abatkov, spokesman for Inkombank.


In contrast, Sberbank interest rates start at 30 percent, he said.


Both Inkombank and MOST-Bank, the second and fourth largest private depositor banks, respectively, have plans to loosen Sberbank's grip on the retail banking market.