Elvira Nabiullina’s speech at joint meeting of State Duma dedicated committees on Bank of Russia’s 2024 Annual Report

Good afternoon, dear colleagues.

First of all, I would like to thank the working group and the deputies of the dedicated committees for your constructive and professional approach to reviewing the Bank of Russia Annual Report. As usual, this is a comprehensive multi-stage process. All my key deputies (they are here today) and the directors of the Bank of Russia’s departments were involved in this work from the very beginning. I strongly support the invitation of Government representatives to the meetings reviewing the Annual Report. Our close collaboration is really efficient, which directly influences the results. I will later on get back to this critical issue.

We received a lot of questions from deputies concerning a wide range of topics covered in the Report. We take into account these questions when preparing to the meetings with the factions before the plenary session. As last year, many questions regarding the Report, including both submitted in writing and asked in the course of the working group’s meetings, were related to the effectiveness of monetary policy and its impacts on investment and the economy in general. I would like to start off with these very questions and our assessment of the current situation.

The economy was quickly expanding over the course of 2024, for the second consecutive year. All the data available today show that the economic growth remained fast at the beginning of 2025 as well. The upturn in a number of industries has been driven by strong government demand. Other industries have notably increased profitability over the past three years.

I would like to remind you that profits earned by companies in the real sector in 2024 exceeded ₽30 trillion, for the second year in a row, despite a slight reduction. Businesses have been actively investing their profits and building up their production capacities, which economists refer to as the potential of the economy. Furthermore, enterprises have continued to raise loans. Over 2024, corporate lending expanded by ₽13 trillion, with half of this growth rate accounted for by investment and housing construction projects. Even adjusted for inflation, corporate credit increased twice as much as the economy. Bond loans were up by another ₽4.7 trillion.

In a word, businesses have been actively developing even in the conditions of a high key rate. The Bank of Russia’s policy is cooling down soaring demand that mainly translates into inflation and pushes up companies’ costs, rather than contributes to sustainable growth or expands the economy’s potential. We have never aimed to freeze lending, as is sometimes stated. The key rate path chosen will make the pace of the increase in credit more balanced. However, lending will continue to expand this year as well, thus contributing to the economic growth. The banking system remains stable and resilient, despite the sanctions enacted last year.

The result of the key rate increase is a slowdown in inflation. The annualised inflation rate will remain high for a long time, but current inflationary pressures should be gauged not through the price growth over the past 12 months but through the annualised rate during the current month. Thus, current inflation in November—December 2024 was dangerously high reaching about 14% in annualised terms. This year, it has slowed down, namely to below 11% in January and below 8% in February. As to March, we will only get the statistics next week.

Nonetheless, this does not mean that the effect of the key rate started to manifest itself as late as the beginning of 2025. The key rate was limiting strong inflationary pressures throughout the previous year. They peaked last autumn, necessitating the key rate rise to 21% per annum.

Inflation will continue to slow down during the coming months and, according to our estimate, will return to normal by the end of the year. However, the inflation rate over the year as a whole will still exceed 4% due to the high levels of early 2025.

In view of this, you can certainly say that a similar situation was observed a year before when inflation was decelerating but then started to rise again, which required the key rate increase from 16% to 21% per annum. We definitely factor in the past experience. Nevertheless, there are important differences.

In the first place, the key rate is now five percentage points higher than a year before, thus being a much more powerful force.

The second factor is changes in fiscal policy. Indeed, at the beginning of the year, the budget system was making larger advance payments under government contracts, and many pointed to the budget deficit. Nonetheless, we assume that budget spending will decelerate in the next few months and the budget parameters for the year in general will be in line with the fiscal rule, which means that the budget will have a disinflationary effect.

The third factor is the current appreciation of the ruble that will also help slow down inflation, provided that this strengthening turns out to be sustainable.

That said, we are very cautious about a reduction in the key rate, especially considering last year’s experience. At the March meeting, the Board of Directors did not even discuss a key rate decrease. Moreover, a key rate rise is still likely if inflationary risks materialise, as it happened last year.

Nonetheless, I would like to emphasise that market rates on both loans and deposits have already started to go down. This is a normal response to the decrease in both actual inflation and, which is more important, concerns about future inflation. Loan rates usually follow yields on federal government bonds, which have notably dropped from December 2024, with a certain time lag. Today, loan rates are close to the levels of May—June 2024 when the key rate was 16% per annum.

Of course, everyone would prefer to see a faster decline in interest rates. However, it would be naïve to think that the key rate is a magic wand. Cutting the key rate while ignoring high inflation would involve negative consequences, namely a new spike in prices and an even more considerable rise in market rates.

Today, the economy is using almost all resources available. A very good proof of this is record low unemployment. Therefore, encouraging demand is only possible to a certain extent, if at all. This is equally applicable to both subsidised mortgages and subsidised corporate loans. No matter how you slice the cake, it is still the same size. There is only one efficient way to expand the potential of the economy in the current conditions – we need to implement new technologies and improve labour productivity, while moderate inflation will provide a good balance to make our way.

The question that arises is where to find the money for new equipment and new technologies. I have already said that profits remain high, but not all businesses are able to finance their development from profits only.

In our opinion, fast-growing and mature well-known companies should raise funding on the exchange by making public share offerings. We have been talking a lot about this. When loans are expensive while companies earn high profits, equity funding is a better option. The Government can encourage companies to do this, including by reallocating budget funds from subsidised loans towards support for equity investment.

This approach has been underway for small and medium-sized businesses, the so-called small technology companies as part of agreements with the Government. In our opinion, this approach can be applicable to large enterprises as well. Last year, the Bank of Russia submitted relevant proposals to the Government. This would be a reasonable solution as credit involves higher risks than shares and produces a stronger proinflationary effect. Companies raising loans when interest rates are low are exposed to the risk of losses if interest rates go up. Examples abound. If it is the Government who accepts interest rate risk by subsidising loan rates, their rise will become a heavy burden on the budget.

Increasingly more businesses will opt for initial public offerings, although it is currently unclear how fast this process will be. What we can do is further develop the infrastructure of the financial market and the entire range of long-term instruments, which was reported in detail by Philipp Gabunia at the working group’s meeting that took place yesterday. These are the Long-term Savings Programme and type 3 individual investment accounts launched in 2024. This year, the range of instruments will be supplemented with unit-linked life insurance, and it is critical to make this product no less attractive to people in terms of taxation than the former two options. We hope for support from the State Duma in this regard.

I know that the working group did not have enough time at yesterday’s meeting to discuss in detail two very important areas of the Bank of Russia’s work – consumer protection and anti-fraud measures. So, I would like to say a little more about these issues.

Our priorities in consumer protection remain the same – countering unfair sales, protection of consumer rights, and protection of the most vulnerable social groups, that is, elderly people and persons with disabilities. Legislative amendments help us a lot to implement our objectives in this area. Thus, as a result of amendments to the law on consumer loans, the number of complaints about tied selling of paid services nearly halved last year. The number of complaints about misselling has notably decreased over the past few years. This problem still exists but it is no longer as acute as before.

What we definitely need is higher fines to be imposed on banks failing to respect consumer rights. We believe that these fines should be raised. Of course, encouraging banks to improve the culture of work is a key area for the Bank of Russia, but higher liability will notably limit the use of unfair practices.

The law on the permanent mechanism of loan repayment holidays came into force last year. Over 2024, banks restructured 1.2 million retail loans worth more than ₽600 billion, both according to the law and as part of their in-house programmes. The next critical step, in our view, is to adopt the law on comprehensive settlement of a borrower’s debt to different banks because many individuals raise loans from more than one bank. We expect that the relevant draft law will soon be submitted to the State Duma for consideration and reviewed.

Another important issue is the regulation of instalment payments, and here, I do not need to explain why it is good and important to adopt this draft law in the first reading. It is essential to approve this law as soon as possible to protect consumers and eliminate the invisible growth in the debt burden.

I would now say a few words about fraud. This year, we received much more questions from you about what had been and would be done to combat fraud, including about the effectiveness of the two-day cooling-off period for suspicious money transfers.

We have been closely monitoring how banks use this mechanism and can say that it is efficient and has already protected hundreds of thousands of people against fraudsters. Based on information from the Bank of Russia’s database, large banks suspend nearly 300,000 money transfers monthly.

It is critical to ensure that this database contains comprehensive information about scammers, provided by both banks and the Ministry of Internal Affairs. The information should not only be complete but should also be submitted to the database as soon as possible. To this end, we have set stringent requirements for banks and are enhancing the online exchange of data with the Ministry of Internal Affairs. If the Bank of Russia’s database contains the information requested by policemen, it will be provided to them in a minute.

Based on the data received from the Ministry of Internal Affairs, banks in turn block cards of the so-called droppers withdrawing stolen funds. This is currently the weakest point in fraudulent schemes. We have been pulling the plug on them step by step and will be increasing the pressure further. By the way, the President issued the relevant instruction yesterday. I would like to stress that we are doing everything possible to prevent frauds even if the core of a gang is in a foreign country. We have been closely cooperating with the law enforcement agencies to achieve this.

Our main objective in this area this year is to implement new tools enacted by the lawmakers so that people feel changes for the better. These tools include the law on combating credit fraud and the law on the ‘confirming hand’ option that the State Duma adopted just a short while ago.

The Bank of Russia together with the Ministry of Digital Development, Communications and Mass Media and the Government will be developing a national antifraud platform. Our role in the project is to connect the banking system to this platform, and we are prepared to do this.

There are several more areas, including the law on the self-ban on loans that came into force, but I might overrun my time speaking about this. By the way, we have issued a special guide on countering fraud – you can see it in front of you. The aim was to make it simple and clear. This issue is supervised by German Zubarev and we are ready to answer any questions about this.

As regards payments, this topic was covered in detail in the report that Alla Bakina presented yesterday at the working group’s meeting. Therefore, I will only speak on the key aspects. Russia has all components of the payment infrastructure, an achievement not all countries can boast. In particular, Russia has its own payment card system, Financial Messaging System and Faster Payments System, which largely mitigated the effect of last year’s sanctions on households: the severe sanctions were enacted against more than 50 banks as well as exchanges. All these systems are actively advancing and, in the future, will be supplemented with the digital ruble.

Winding up, I would like to say a little more about what I began with – the collaboration between the Bank of Russia and the Government. Esteemed deputies expressed concerns several times that our efforts were not properly synchronised. This was also one of the issues at the working group’s meetings. This topic is often discussed in mass media, which means that this is a matter of public concern. I would like to assure you that close coordination between the Bank of Russia and the Government is not just empty words. There are three reasons to state this.

First of all, we continuously exchange our assessments of the current economic situation, data and plans, so as to avoid blind spots in decision-making. The Bank of Russia and the Government make decisions independently within their respective mandates but with a full understanding of each other’s further moves. There are many issues where we share a common vision. Thus, the decrease in the coverage of non-targeted subsidised lending programmes was the result of our discussions.

The second thing I already spoke of in the State Duma in autumn when you were reviewing in detail the Monetary Policy Guidelines and would like to reiterate now is that even when fiscal and monetary policies are oppositely directed — that is, the former is expansionary while the latter is tight – this does not mean that they conflict with each other. Monetary policy should be independent not to make decisions that would contradict the Government. Monetary policy always plays a balancing role to protect macroeconomic stability. This is far too important. Macroeconomic stability is a solid foundation for the Government to construct its building – the economy of supply – and develop the economy of supply.

Thirdly, the entire agenda of advancing the financial market, supporting small and medium-sized businesses, ensuring digitalisation, unblocking assets, and, since recently, combating fraud is the subject matter of our joint work with colleagues from the Ministry of Finance, the Ministry of Economic Development, the Ministry of Digital Development, Communications and Mass Media, and the Government as a whole. In these areas of cooperation, we not only exchange information but also have common plans and working groups. We continuously communicate with the Ministry of Industry and Trade, the Ministry of Construction, and the Ministry of Agriculture on sectoral issues.

In brief, we work in tandem, while being perfectly aware of the objective constraints, our mutual responsibility, and, most importantly, our common goal. Sustainable economic growth and increasing people’s welfare are the key values we have always fully shared.

My speech is concluded. Thank you all for your attention. I am ready to answer your questions.