Russians don’t trust banks. They prefer to collect cash

The demand for cash reached a record in Russia. According to the central bank, there are almost 18 trillion rubles in circulation, or the equivalent of $187 billion. This is the effect of the moods caused by the war in Ukraine, in the face of an uncertain situation, citizens prefer to accumulate hard currency because they do not trust in the stability of the banking system. “People don’t like to rely on banks. Having cash means having money,” said Igor Lipsits, an economist and professor at Russia’s HSE University, in an interview with Novaya Gazeta. He added that Russians who have bank accounts in neighboring countries such as Kazakhstan also deposit their money in sanction-free banks.

War fuels the demand for cash

According to official figures, the amount of cash circulating in the Russian economy skyrocketed from 13.8 trillion rubles in January 2022 to 15.8 trillion rubles in February 2022, coinciding with Russia’s invasion of Ukraine.

Thereafter, cash in circulation fell steadily until last June, after which it jumped 6%. to 15.2 trillion rubles a month in September – which coincided with Putin’s mobilization of reservists to fight the war. Since then, the amount of cash in circulation has been increasing.

Compensation for the deaths of Wagnerians

The amount of cash in circulation is also driven by the payment of compensation to the families of the killed fighters from the Wagner Group. Several women confirmed to Bloomberg in June that they had collected compensation – amounting to about 5 million rubles per person – in bags from pick-up points across Russia. Many were told not to deposit cash in banks to avoid taxes and other complications.

According to the Wagner-linked Telegram channel, some 22,000 Wagner fighters were killed in the war in Ukraine by May 20 this year.