According to the estimates of the Center for Macroeconomic Analysis and Short-Term Forecasting, a think tank, around 200 banks are likely to collapse this year due to bad loans and a drop in the value of the ruble, reported Vedomosti, a Russian business daily.
As per the International Monetary Fund estimates, the economy of Russia is expected to decline by approximately 3.5% in 2015.
The drop in crude oil prices and the Western sanctions against Russia over its role in the Ukraine crisis is taking a toll on the businesses. The problem is considered to be serious for the banking sector, which has an external debt of $192bn, andapproximately 70% of this is dollar-denominated, reports Business Insider.
The debt is likely to get larger as the value of ruble declines against dollar and other major currencies. Over the last one year, the Russian currency’s value has seen a drop of almost 50% against the US dollar.
Last month, the government was forced to pump in $2.4bn into the banking sector including state-owned VTB and Gazprombank. However, the government seems to be support only large players.
Interfax Center for Economic Analysis deputy director Alex Buzdalin was quoted by Business Insider as saying: "We have reached a situation in which these firms are being forced to shrink their balance sheets, which can start a domino effect: the efficiency of small banks has been falling for a long time – their existence has become hopeless, and now there’s a crisis."
Image: Bank of Russia. Photo: Courtesy of Kuba/Wikipedia.