According to data released by the Central Bank of Russia and reported by The Moscow Times, cash in circulation in Russia surged by nearly 621 billion rubles in July, marking an absolute monthly record for the year and a historic high for the month of July generally. This liquidity shift coincides with rising business tax burdens and mobile internet disruptions caused by Ukrainian drone attacks.
Bank Liquidity Deficits Driven by Record Cash Withdrawals
The July surge follows a similar spike in April when available cash increased by nearly 608 billion rubles, bringing total bank withdrawals to more than 2.5 trillion rubles over a six-month period, according to The Moscow Times. Taras Skvortsov, vice president of Sberbank, described the trend as an absolute record on a monthly basis for the current year and a historic record for July, noting it has created a ruble liquidity deficit across several banks.
Sberbank forecasts project that cash in circulation will expand by 3.8 trillion rubles before the end of the year. Economist Nikolai Korzhenevski told The Moscow Times that the scale of the withdrawals indicates panic has reached major corporations and well-informed individuals who possess inside knowledge of upcoming negative developments in Russia.
Tax Increases and Mobile Internet Outages Push Businesses Into the Grey Economy
The primary driver behind the cash outflow is the transition of businesses into the grey economy following tax hikes, alongside recurring mobile internet disruptions that hinder card payments. Frequent Ukrainian drone strikes have repeatedly cut off mobile data in large parts of Russia, making card transactions impossible for many consumers.
A May survey conducted by Opora Russia, the country’s largest association of small and medium-sized enterprises (SMEs), revealed that approximately 6% of entrepreneurs resort to informal cash schemes to mitigate new tax burdens by bypassing cash registers. Cash transactions enable firms to depress reported turnovers and stay below value-added tax (VAT) thresholds, while cash wage payments help companies avoid taxes on labor remuneration.
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Prior to the implementation of the VAT increase, President Vladimir Putin warned that new regulations must not push enterprises into the shadow economy and called for a radical reduction in illegal employment.
Banking Sector Strain Leads to Branch Restrictions and VTB Staff Reductions
Banks have responded to the liquidity pressure by implementing withdrawal limits, high fees, and restrictive conditions to retain capital. Concurrently, VTB, Russia’s second-largest bank, announced sweeping staff reductions due to deteriorating financial performance, rising “bad” loans, and a collapse of its stock price to a historic low on the Moscow Exchange.
Dmitry Piyanov, deputy head of VTB, stated that the bank will lay off approximately 10% of its workforce. Between January and March of 2026, the bank’s profit dropped by 20%, with the decline reaching 34% by June, while problem loans nearly doubled.
Broader Economic Slowdown and Government Budget Pressures
The return to cash mirrors historical spikes observed after President Vladimir Putin announced a partial mobilization in September 2022 and during the short-lived mutiny by the Wagner mercenary group in June 2023. This current trend complicates tax collection for the state at a time when the federal budget deficit is expanding and financing the war in Ukraine requires every ruble the state can collect.
Although the oil and gas sector—which accounts for approximately one-quarter of state revenues—has benefited from recent post-war oil price increases after the war in Iran, the broader economy is slowing down. In May, Russia’s Ministry of Economy downgraded its gross domestic product (GDP) growth forecast to 0.4% for 2026, marking the weakest economic expansion since 2022. To boost state income, the Kremlin increased VAT from 20% to 22% in January and lowered the revenue threshold for small and medium businesses subject to the tax, pushing many already struggling enterprises toward insolvency.
Frequently Asked Questions
Why are Russians withdrawing record amounts of cash from banks?
According to data from the Central Bank of Russia and reports by The Moscow Times, withdrawals have surged due to businesses moving into the grey economy to evade higher taxes, recurring mobile internet outages caused by drone strikes that block card payments, and corporate panic over economic risks.
How much money has been withdrawn from Russian banks recently?
Data shows that cash in circulation grew by nearly 621 billion rubles in July, following a 608 billion ruble increase in April, totaling more than 2.5 trillion rubles withdrawn over a six-month period.
What impact are these withdrawals having on Russian banks?
The massive outflow has created a ruble liquidity deficit across multiple banks, prompting institutions to impose withdrawal limits and high fees, while major lenders like VTB have announced workforce reductions of up to 10% due to shrinking profits and rising bad loans.
What role do taxes play in the shift to cash?
The Kremlin raised VAT from 20% to 22% in January and lowered the threshold for SMEs, leading businesses in retail, restaurants, and services to utilize cash to lower reported revenues and avoid tax liabilities.
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