Central Bank of Russia expects full normalization of spreads between deposit rates and key rate in Q2

MOSCOW. April 2 (Interfax) - The Central Bank of Russia expects the full normalization of the spreads between deposit rates and the key rate in Q2, Deputy Central Bank Governor Alexei Zabotkin said at the State Duma.

"The divergence between deposit and credit rates and the key rate that occurred in November-December was of a very short-term nature. Currently, deposit rates (both for individuals and legal entities) have returned to the level of the key rate. Retail rates have fallen below the key rate, as is typical in a normal situation. This spread has also significantly narrowed, and we believe that it will fully normalize in the second quarter," Zabotkin said.

The need to meet the minimum short-term liquidity (STL) requirements at the end of last year increased competition among banks for client funds, which led to a widening of the spread between deposit rates and the key rate. Amid the rising cost of liabilities, banks started to increase spreads on loans as well.

To reduce the impact of the STL on pricing of banking products, the Central Bank decided to expand the use of irrevocable credit lines (ICL) by banks and shifted the timeline for major banks to comply with short-term liquidity regulations without ICLs. The current level of 50% will remain in effect from January 1 to June 30, 2025, and will increase to 60% from July 1, 2025. Central Bank Governor Elvira Nabiullina said in February 2025 that these measures had helped narrow the spreads between deposit rates and the key rate.