Constant internet blackouts have forced Russian citizens and businesses to return to cash. According to the Central Bank of Russia (CBR), the volume of cash in circulation increased by 0.3 trillion rubles in March, following a 0.2 trillion increase in February. Total liquidity outflow from the banking system for the first quarter of 2026 has reached half a trillion rubles.
Key Drivers of the Cash Surge:
- Infrastructure Failure: The regulator explicitly links this trend to frequent mobile internet shutdowns, which prevent digital payments and compel people to keep “emergency cash” for daily transactions.
- Breaking a Decade-Long Trend: Historically, cash returns to banks in the first quarter after the holiday season. The current quarterly outflow of 0.1 trillion rubles (net balance) is an anomaly, previously seen only during the 2023 crisis.
- March Peak: The growth of cash in circulation became the primary factor behind the liquidity deficit in the banking sector last month.
Analytical Summary:
The massive shift back to cash due to internet instability signals a regression of one of the world’s most advanced fintech systems and a return to the economic habits of the 1990s.
Infrastructure Paralysis: For years, Russia led in the penetration of cashless payments. However, “digitalization” has now become a vulnerability. Regular internet outages paralyze store terminals and mobile banking apps. For businesses, this means the risk of halting sales; for citizens, it’s the inability to buy essentials. Switching to cash is a natural survival response to the loss of control over payment infrastructure.
Impact on Banking Liquidity: Half a trillion rubles withdrawn from banks represents capital that is no longer working for the economy. Banks are losing cheap liquidity, which, combined with the already high key interest rate, further restricts lending capacity. The CBR acknowledges that the growth of cash in circulation was the main driver of the banking sector’s liquidity shortage in March.
Informalization and Inflation: The return to cash inevitably expands the “gray” sector of the economy. Cash transactions are harder to monitor, leading to lower tax revenues. Furthermore, the higher velocity of cash (“money in hand”) creates additional inflationary pressure. While money previously sat in accounts earning interest, it has now become a “hot” resource for immediate spending.