Nature of Bank Deposits

in Russia

Submitted To:-Dr. Rituparna Das(Faculty of Management)

Submitted By:-Vaibhav SinghRoll No. :- 781

Under Article 4 and Article 46 of the Federal Law on the Central Bank of the Russian Federation (Bank of Russia), the Bank of Russia conducts operations to take deposits from credit institutions for the purpose of regulating banking sector liquidity. Deposit operations are conducted in compliance with Bank of Russia Regulation No. 203-P, dated November 5, 2002, "On the Procedure for Conducting Deposit Operations by the Central Bank of the Russian Federation with Credit Institutions in the Currency of the Russian Federation" (with amendments).

At present the Bank of Russia conducts the following deposit operations with resident credit institutions in the national currency: deposit operations at fixed interest rates and deposit operations at auction rates (deposit auctions).

Deposit operations at fixed interest rates are conducted daily on standard conditions (established by paragraph 4.3 of Bank of Russia Regulation No. 203-P, dated November 5, 2002, "On the Procedure for Conducting Deposit Operations by the Central Bank of the Russian Federation with Credit Institutions in the Currency of the Russian Federation" (with amendments).

Deposit auctions are held weekly on Thursday on the conditions set by the Bank of Russia (in accordance with the quarterly schedule of deposit auctions). Deposit auctions are held according to the American auction principle, when a credit institution may make both competitive and non-competitive bids, but Dutch auctions are also possible. The largest possible share of non-competitive bids set by the Bank of Russia for a credit institution is 50%.

Bank of Russia counterparty credit institutions may make bids to the Bank of Russia for participation in a deposit operation by:

1. passing to the Bank of Russia regional branch a tender agreement (compiled in established form);

2. conducting negotiations through the Reuters Dealing System;

3. making a bid to the MICEX Electronic Trading System (hereinafter MICEX ETS).

Deposit transactions via the Reuters Dealing System and MICEX Electronic Trading System are conducted on behalf of the Bank of Russia by its Moscow-based authorised division, the Bank of Russia General Economic Department.

A Bank of Russia counterparty credit institution is free to choose any of the aforementioned ways of making a bid for participation in a deposit operation.Bank of Russia counterparties in deposit operations are banks, settlement non-bank credit institutions, and non-bank credit institutions conducting deposit and lending operations.

Requirements for Bank of Russia counterparty credit institutions

As of the Bank of Russia deposit operation date, a credit institution should meet the following criteria:

1. it should belong to the first or the second classification groups under Bank of Russia standard acts (for non-bank credit institutions -Bank of Russia Ordinance No. 766-U, dated March 31, 2000, with amendments; for banks - Bank of Russia Ordinance No. 2005-U, dated June 30, 2008);

2. it should comply with the Bank of Russia reserve requirements (have no shortfall in the required reserves or unpaid fines imposed for non-compliance with the reserve requirements and should present the required reserve calculation);

3. it should not have overdue pecuniary obligations to the Bank of Russia.

A credit institution should have a correspondent account (subaccount) agreement or an additional agreement to the correspondent account (subaccount) agreement concluded with the Bank of Russia regional branch where it has a correspondent account or subaccount(s), giving the Bank of Russia the power to recover from the correspondent account or subaccount(s) without the credit institution’s order a fine for non-compliance (improper compliance) by the credit institution with its obligations in respect to a deposit operation.

Thank You.,!!