The value of the ruble is now less than 1 US cent. The Russian currency on Tuesday was pegged at over 105 to a dollar, up from about 75 just a month ago after companies and even households came under severe pressure with the US and EU thrashing out sanctions against Russia and barring many Russian banks from accessing the SWIFT payment system.
The central bank, which acknowledged that the country’s economic dynamics have “altered dramatically”, increased the key policy rates to 20 per cent- more than double — from 9.5 per cent in a desperate attempt to maintain financial and price stability.
In a bid to support the local currency and protect it from further depreciation, foreigners have been banned from selling Russian securities.
The central bank, in a statement, said that due to the high demand for cash, the banking sector was experiencing a structural liquidity deficit. To ease the pressure somewhat, it has started providing cash and non-cash rubles to banks to maintain liquidity in the system. The country’s lenders have been asked not to decrease assessments of a borrower’s financial standing and debt servicing quality amid the uncertainty. The banks have been instructed not to increase their provisions during the year.
In the current situation, it is crucial to maintain the potential for lending to both households and businesses, Bank of Russia Governor Elvira Nabiullina said after she increased key policy rates with an attempt to maintain macroeconomic stability and rein in inflationary pressures.
“In crisis conditions, banks tend to shift towards conservative approaches and slow down lending. Therefore, we have already provided relaxations to banks by suspending the limit on the total cost of a consumer loan,” she said, adding that the central bank is ready to implement all necessary measures to maintain financial and price stability.
She added that all lenders will continue to fulfil obligations towards their clients. All funds in clients’ accounts are preserved, and all transactions are available to clients.
“In such volatile and absolutely crucial situations, the role of any central bank is enhanced. Every action of the Russian central bank will be monitored and scrutinized,” an analyst said.
(IANS)