Reduction of the Share of Cash Funds by a Half will Increase Banks’ Resources by Rb 3 Trillion

Limitation of the maximum amount of the deal in cash settlements has the following objectives. Firstly, the above measure is aimed at fighting the shadow business in the Russian economy. Secondly, limitation of cash settlements is expected to result in growth in account balances with Russian banks. However, to achieve that purpose a developed infrastructure of non-cash payments and reduction of bank fees for acquiring of bank cards are needed.

In Russia, though the extent of payments by means of bank cards has been growing fast in the past few years it still lags several times behind that of developed countries. So, in 2012 holders of Russian bank cards carried out Rb 3.7 trillion worth of transactions for payment of goods and services which figure is equal to about 6% of GDP of the Russian Federation in the same year. Within five years, the volume of purchases with use of bank cards rose nearly eight times over. In the same period, in the US the volume of payments by means of bank cards amounted to over 26% of GDP, while in the UK, to 32% of GDP (according to the data of the Bank for International Settlements).

 

In Russia, the low level of utilization of non-cash payments results in prevalence of a large share of cash funds in the aggregate money supply. At present, in Russia the share of cash funds in the total volume of money supply (М2) amounts to 23%. It exceeds by over 100% the indices of the most developed economies of the euro area and the US wh ere the share of cash funds does not exceed 10% of the value of the money supply even with taking into account the fact that cash US dollars and euro are widely used beyond the borders of countries -- issuers of those currencies. Reduction of the share of cash funds by a half (to 11%-12% of the money supply) will increase the resources of Russian banks by nearly Rb 3 trillion.

 

However, the main conditions which undoubtedly ensures growth in demand in noncash balances is convenience of transactions and confidence of consumers in safety of such a mode of payment. The restrictive measures proposed by the Government will leave a larger portion of the sales turnover unaffected. At present, the average monthly expenditures do not exceed Rb 14,000 per person which means that most deals are not affected by the new law.

 

М.Yu. Khromov, Leading Expert of the Structural Research Center