The Bank of Russia calculates the maximum interest rate for the ten largest credit institutions. This rate is now close to 15%. Of course, we are talking about deposits in Russian rubles. And let us emphasize once again: we are talking specifically about the average maximum interest rate. As you know, the market offers individual deposits on more favorable terms. But, as always, dynamics are important. Since at the end of the first ten days of January 2024, the maximum interest rate (averaged, as you understand) was 14.79%, we can conclude that interest rates are rising.
A few more explanations from the Bank of Russia about what these maximum interest rates are. They are calculated as the arithmetic average of rates for the ten largest credit institutions in the country. The maximum interest rates on deposits available to any client without restrictions or preconditions are taken into account. At the same time, rates on deposits intended for selected categories of clients (children, pensioners), as well as on deposits for special purposes (social and humanitarian purposes, etc.) are not taken into account. Interest capitalization rates are also not taken into account, as are a number of specific deposits.
The dynamics of how the maximum interest rates have grown in recent months is impressive: if in the first ten days of January 2024 the maximum interest rate, as already noted, approached 14.8%, then in the first ten days of October 2023 it was only 10.18 %, and in May 2023 even less – 7.64%.
If you look at how the maximum interest rates on deposits of different durations increased, then the growth dynamics for them look impressive: for deposits for up to 90 days, the maximum interest rates reached 11.80% in the first ten days of January 2024, and were 9.19% in in the first ten days of October 2023 and 5.64% in the first ten days of May 2023. Thus, the maximum interest rate increased from May 2023 to January 2024 for deposits for up to 90 days by 2.1 times.
Maximum interest rates on deposits for a period of 91 to 180 days increased from 6.75% in the first ten days of May 2023 to 11.16% in October 2023 and to 14.49% in the first ten days of January 2024. An increase of more than 2.1 times.
For deposits for a period from 181 days to 1 year, maximum interest rates also showed strong growth dynamics: from 6.61% in the first ten days of May 2023 to 9.39% in October 2023 and to 14.72% in the first ten days of January 2024 of the year. The rate for such deposits increased by more than 2.2 times during this period.
And finally, about long-term deposits (for a period of more than 1 year). For such deposits there was also an increase in maximum interest rates, although not as significant: from 8.37% in the first ten days of May 2023 to 10.01% in the first ten days of October 2023 and to 12.94% in the first ten days of January 2024 . The increase in the maximum interest rate on such deposits for this period was 1.5 times.
Thus, if we take the period from May 2023 to January 2024, then at this time the maximum interest rates on deposits for a period from 181 days to 1 year increased the most. And a significantly smaller increase in interest rates was recorded for deposits for a period of more than 1 year. This is quite interesting, because it would seem that banks are always interested in depositors investing for a long time. This has its own logic, understandable and convincing: by parting with their money for a long time, depositors in the same way provide banks with the opportunity to use their money for a long-term period. Banks, by attracting money for long-term deposits, can manage this money more confidently, building an appropriate investment strategy.
The fact that attracting money for long-term deposits today is not so interesting for banks is indicated by the very values of maximum interest rates. Based on the results of the first ten days of January 2024, the maximum interest rate was for deposits from 181 days to 1 year. This rate is slightly higher than the maximum interest rate for deposits for a period of 91 to 180 days and significantly higher than the maximum interest rates for short- and long-term deposits.
For us, depositors, from all that has been said above, it should be taken into account that, firstly, maximum interest rates have increased in recent months. Secondly, they grew the most in medium-term deposits.
What does this mean for investors practically? Today, it is most economically profitable to invest your money for a period of 91 to 180 days or for a period of 181 days to 1 year. Although the situation may vary depending on the bank. If rates go down during the term of the deposit, you will have an even more favorable effective deposit rate. If it goes up, that is, the rates even increase comparatively, you have the opportunity in the foreseeable future to “shift” to new, more profitable rates. Quite a few people, I note, have already learned this feature of the present time, and they do so.
It is clear that this is not very profitable for banks when depositors, in pursuit of higher interest rates, begin to close open existing deposits and transfer to new ones. Although more often they wait until the end of the deposit and open a new one for the “necessary” period. Banks, of course, cannot prohibit depositors from doing this, but they can somehow try to slow down such a process by trying to come up with various kinds of restrictive conditions.
Banks cannot prevent the premature closure of deposits because, according to Art. 837 of the Civil Code of the Russian Federation, the depositor has the right to fully or partially reclaim his deposit at any time, without waiting for the expiration of the deposit period. However, banks are not obliged to return money to the depositor immediately – on the day when he applied to close the deposit. The period within which the bank is obliged to return funds to the depositor in the event of early closure of the deposit may be specified in the agreement. As a rule, the bank in this case returns the money to the depositor with a symbolic interest income (from 0% to 0.01% with a “Demand” interest rate).
For what period is it most profitable to place a deposit today? We figured it out. But here’s the question: why have long-term deposits ceased to be the most attractive in terms of maximum interest rates? Imagine that against the backdrop of the latest increase in the key rate by the Central Bank to 16% and an increase in rates on bank deposits to fairly high levels, people will begin to invest for long periods at today’s high interest rates. This is how much interest income depositors will have to pay, while the key rate of the Bank of Russia, and this is quite likely, may begin to decline. The key rate will begin to decline, deposit rates will also decline, and long-term deposits will bear a high interest rate. Banks, of course, do not want to find themselves in such a situation. So they are trying, with the help of the current interest rate policy on deposits, not to stimulate (no matter how much they would like it for traditional reasons) long-term banking investments of citizens.
It turns out that the current atypical situation, when lower income is offered on long-term bank deposits, is a consequence of the peculiarities of the current time. When there are expectations that during 2024 the Bank of Russia will move to lower the key rate with all the ensuing consequences.
For us, investors, it is important to know what is most profitable today. And act here at your own discretion, accordingly. What about the banks if they suddenly misjudged the prospects for a key rate reduction by the Bank of Russia? They will be fine, don’t worry. Last year, 2023, by the way, turned out to be extremely profitable for banks. According to the Bank of Russia, the total net profit of Russian banks in 2023 amounted to 3.3 trillion rubles – colossal money and a record result. So they won’t go to waste anyway!