With Russia officially blocked off from both the US dollar and the euro, the state-owned VTB Bank has offered its customers the option of opening Chinese Yuan Deposits in Russian Banks’ savings accounts, which pay up to 8% interest. Western sanctions targeting Russia’s ultimate financial isolation for its war in Ukraine have damaged the country’s second-largest bank.

Existing customers can apparently use VTB Online to open Yuan Deposits in Russian Banks with a minimum deposit of 100 yuan (Rs 1,210.75). They can deposit a minimum of 500 yuan at VTB branches. The latest offer, according to the bank, will be the most beneficial alternative to foreign currency deposits. A three-month deposit offers an annual interest of 8% in dollars and 7% in euros.

In the meanwhile, a six-month ruble deposit presently pays a 21% annual percentage yield. Customers have invested over a trillion rubles (Rs 1,15,138.80 crore) in traditional savings products, according to VTB. Following the imposition of sanctions relating to Ukraine, Russian financial institutions have been under growing pressure. After Visa and Mastercard announced their suspension of operations in China, banks were forced to turn to China to begin utilising its UnionPay system for credit cards.

Ruble plunges 38% against Chinese yuan and US dollar

Moreover, this year, the Ruble has plunged 38% against the Chinese yuan and the US dollar. According to a report published last week by ANZ, Russia’s central bank and sovereign wealth fund own a combined $140 billion (Rs10,74,628.80 crore) in Chinese bonds, and the country may seek access to the assets due to global sanctions. The sanctions have also focused attention on China, which has a multibillion-dollar currency swap with Russia, to see if it can give a financial lifeline to Russia in order to thwart Western efforts to cut Russia out of the global financial system.

Furthermore, VTB Bank is prepared to wind down its European operations after being struck hard by Western sanctions, according to the Financial Times, which cited sources familiar with internal deliberations. VTB has an investment banking operation in London and a retail bank in Germany with 160,000 customers, but it has determined it cannot operate outside of Russia after its assets were blocked by Western allies, according to the sources.

(With inputs from agencies, Image: AP)