The market for retail deposits in Russia

Because term deposits are fixed-income financial instruments they are vulnerable to inflation. When their nominal interest rates (NIR) are lower than inflation, depositors are worse off as consumers and investors and banks are better off as borrowers. Part of deposits' purchasing power is transferred from the former to the latter. In modern Russia there exist all conditions for such a transfer: moderate inflation, millions of households forced to keep their savings primarily at “gosbanks”, a highly concentrated and oligopolistically structured banking industry, successful attempts by banking “oligarchs” to keep NIR at such a low level that real return on deposits stays negative.