Interest rates on bank deposits in Russia are experiencing a decrease.
Bank Deposits Shifting Towards Lower Yields in 2025
In the ever-changing financial landscape of 2025, the bank deposit market has taken a notable turn, with yields steadily dwindling. Although the Bank of Russia maintains its key rate at 21% for four consecutive meetings as per "Kommersant", the banking sector appears to be pulling back on deposit yields.
Last year, deposits offering a yearly interest rate of 25-30% were common. However, these high-yield offers are scarcely found now. A select few banks still boast rates above 25%, but the majority are gearing up for an anticipated easing of monetary policy in the latter half of the year.
As of May 14, the FRG100 index (representing the average rate on one-year deposits in 85 major banks) hovers at 16.2%, a marked drop from 17.54% at year-end 2024. In the top 10 banks, the average maximum rate has plummeted to 19.6%, with predictions pointing towards a further decline to 18-19% by the end of the year.
Reasons for the decline in yields:
- Excess liquidity – As of March 1, 2025, a staggering 57.6 trillion rubles have been deposited (according to the Central Bank), and loan demand is on a downward slope due to the economic slowdown.
- Margin compression – Banks struggle to profitably pay high interest rates while unable to invest funds in more lucrative assets like loans or bonds.
- Central Bank recommendations – The regulator encourages banks to forgo intense rate competition to prevent overheating the financial system.
The Future for Depositors
- Additional rate cuts – As monetary policy is slated to loosen.
- Disappearance of enticing deals – High-yield deposits (beyond 20%) will become a rarity.
- Heightened demand for alternatives – Depositors may seek alternatives like bonds or structured products with more attractive yields.
As banks grapple with inflation expectations and the need to retain clients, depositors must stay vigilant, compare conditions, and scrutinize alternative investment options.
Preview of Public Holidays and Non-Working Days in 2026
In other economic news, the Ministry of Labor has released a forecast of public holidays and non-working days for 2026. Stay tuned for more updates on these matters.
Insights:
- Economic Uncertainty and Interest Rates: The Federal Reserve, Bank of England, and other central banks' interest rate adjustments play a significant role in bank deposit yields. Uncertain economic conditions could lead to rate decreases in parts of 2025 and into 2026.
- Interest Rate Forecasts: Forecasts predict the Fed's key policy rate could stabilize around 3.25% by mid-2026, though this is subject to change based on fiscal policies and market volatility. The Bank of England may cut interest rates in 2025, with a terminal rate not reached until 2026.
- Bank Deposit Yields: If interest rates decrease, yields on deposits might follow, potentially leading to a global trend of lower interest rates in the medium term. Economic and policy developments could contribute to volatility in deposit yields. Investors should be prepared for fluctuations in yields based on evolving economic and monetary policy trends.
In the context of the declining bank deposit yields in 2025, the shift towards lower yields can be observed across various sectors of the industry, including finance and banking-and-insurance. As excess liquidity and margin compression pressure banks to invest funds less profitably, depositors may experience an erosion of high-yield offers and a subsequent need to evaluate alternative investments for attractive returns.
Furthermore, as monetary policy is anticipated to loosen in the second half of 2025, depositors might face additional rate cuts that could continue pushing yields towards lower levels. In response, there is a likelihood of heightened demand for alternatives, such as bonds or structured products, within the banking-and-insurance sector to generate more attractive returns.
