Updated June 4, 2008

   Russian banks managed to change principles of their activity funding – they turned from foreign borrowings to citizens' facilities. In April growth rate of individuals deposits was 3,1%, that twice as more than previous months current year.

However, lending grows much quicker.

Such gap in rates of facilities attracting and spending can result in search of new funding sources by banks within several years, as experts warn.

   As it follows from banking sector express-review published by Bank of Russia, growth rates of individuals deposits in the Russian banks

were 3,1% in April. The April deposits growth has almost twice exceeded the growth rates of this index in February and March current year (1,9% and 1,7% respectively). In January Russia's population preferred to withdraw deposits – facilities outflow from individuals deposits was 0,6%, and that was not marked previous year.

As of May 1, 2008 banks have attracted from population RUR 5,5 trln altogether, that by RUR 166,1 billion more as compared to the previous month.

   Experts name the core reason of dynamic inflow of citizens' facilities to bank deposits the growth of

deposits rates. Banks have actively started to increase deposit rates of population in autumn previous year, when over the world financial crisis the foreign market of capital raising has been "closed" for majority of them. In some banks the rates of the most profitable deposits increased by 13-15%. "We had to quickly increase advertising budget and make gifts up, such as trips", says

retail bank representative.

   However, the effect of commercial banks' marketing efforts appeared just recently. An additional stimulus on the population part to entrust their money to banks exactly became the continuing inflation growth, as adds Investment Bank first vice-chairman Konstantin Bogomazov. "After the population saw that within three months inflation continued to grow despite Bank of Russia efforts, it started to pay great interest to ways of facilities keeping as bank deposits", a banker says.

Moreover, former mutual funds clients joined lending institutions, as adds Trust bank chief analyst Yevgeny Nadorshin.

In April the outflow of population facilities from mutual funds totaled RUR 4,1 billion, and in May – RUR 7,4 billion.

   According to Bank of Russia statistics, banks have invested facilities attracted from the population into lending.

In April the retail lending demonstrated the record growth rates – by 4,5% – since the year beginning.

Syndicated loans attracted in April give banks additional opportunities in lending, as specifies Mr. Nadorshin. Experts suppose that gap of lending growth rates and rates of facilities attraction by banks can be an alarm for the Russian banks.

"Although population still continues to remain the net lender of the Russian banking sector (individuals deposits exceed volume of retail loans given as of May 1, 2008 by RUR 2,1 trln), growth rates of individuals deposits (32%) is almost twice lower than retail loans growth (56,5%)", marks Atlanta PioGlobal investment group chief analyst Maxim Osadchy. According to his opinion, keeping of the current tendency can result in the Russians will become net deb tors by 2012, and banks, as a result, have to look for new ways of funding attraction.