Elvira Nabiullina’s speech at State Duma’s plenary session on Bank of Russia’s 2025 Annual Report
Good afternoon, Honourable Deputies and Mr Volodin.
I am here today, as required by law, to present the Bank of Russia Annual Report for 2025. I shall focus on our work streams that are most relevant to households and the domestic economy, as well as on the questions you raised in writing in our working group meetings and in both our meetings with factions and committee hearings. I recognise these as matters of genuine public concern.
Let me begin by thanking the State Duma for your professional approach to considering the Bank of Russia Annual Report. It is essential that this examination is indeed aligned with the Government’s own efforts. The Bank of Russia and the Government share the ultimate objectives of improving living standards and ensuring economic development, and the results of our work are intrinsically linked.
We are navigating a challenging period, a time when we have to deploy all available resources to ensure the economy continues to develop, meet national objectives, and reconfigure itself as we go along. Despite draconian sanctions, the economy has posted 10% growth over the last three years, and investment has done even better at 16%. Real wages and real incomes have increased by a quarter. And throughout this period, it was imperative to ensure the financial system was steady.
In 2023 and 2024, we raised the key rate, seeking to arrest a rapid rise in prices and to protect the value of wages, savings and pensions. This is the area I want to begin with.
As a reminder, prices had grown very rapidly by late 2024. In just six months, the annualised rate of growth tripled from 5–6% to 15%. Had we turned a blind eye to this problem, inflation would have continued to accelerate. By late 2025, it could have sat at 25% or even 30% – with all the ensuing implications for investment, public finances and household incomes. This is what makes elevated inflation a real threat: unless there is a tight monetary policy in place to hold it back, it spirals upwards.
Yet, by the end of 2025, inflation had fallen to 5.6%. This is the lowest it has been since 2020, though still too high. That is clear from the public concern about price rises we see from our surveys, as well as, I assume, from what you hear at your constituency meetings. Households’ own sense of current price growth is much higher at about 15%. This gap between the official figure and public perception is not the result of miscalculations. It is rather the result of a prolonged period of high price increases. Also, it is further evidence that high inflation is not something we can tolerate.
It should and will continue to decline. Yes, there was a spike in prices in January, driven by an increase in VAT, administered prices, and the recycling charge. However, that was nothing more than a temporary spike, with limited consequences that have largely faded away by now. Another round of utility rate increases is due in the autumn. The totality of these factors is expected to send year-end inflation slightly above the 4% target.
It is essential to stress that the slower pace of inflation is no happy accident. Last year’s developments, including a greater fiscal deficit than initially planned and strong increases in natural monopoly prices, rather came as tailwinds for higher inflation. The slowdown in price growth is a direct consequence of the high key rate.
Once we had stopped inflation from accelerating, we were able to begin a monetary policy easing cycle. From its peak of 21%, we have cut it by 6 percentage points to 15% since June, and it is lower than at the end of 2023. Taking all risks into account, we are moving cautiously, in an effort to avoid a backslide that would force us to retrace our steps.
A decline in inflation is the key sign of an economy moving back to a balanced and sustainable growth path.
While current growth rates are more moderate, we should remember that production facilities were operating at capacity back in 2024. Above all, all the available labour resources were exhausted in the economy. That is precisely why the repeated acceleration in inflation that took place was so tangible.
Struggling industries include coal and oil production, oil refining and ferrous metallurgy. However, their challenges are to a large extent explained by global prices and sanctions. Having said that, many domestic-focused industries posted growth: they continued to grow and hire new staff. Unemployment is at an all-time low.
Had we seen a precipitous fall in economic activity alongside risks of inflation undershooting the target, or rapidly rising unemployment, we would reduce the key rate more rapidly. But neither back in 2025 nor at present do we observe any of these in the wider economy.
Let me now turn to the impact of our policy on credit. I shall begin with mortgages – a subject of great public concern.
Last year, mortgage growth was only slightly below 2024, a time when universally available, non-targeted, subsidised mortgages were still in place. The number of mortgages issued for new builds was broadly similar.
Undoubtedly, Family Mortgage plays the key role, accounting for 72% of new mortgages issued last year. But demand for unsubsidised mortgages is also increasing gradually, driven by a downward trend in rates. We seek to make market-based mortgages affordable, and that is an achievable goal.
Indeed, we have done it before. In 2019, after several years of low inflation, market mortgage rates were 9–10%, and even under 9%. In that year, there were 1.3 million mortgages issued in total – as many as in 2024. The proportion of subsidised lending was minimal then: for every 50 commercial loans, only one was government-subsidised. But today, for every two subsidised loans, there is one market-based loan. You might say that this comes as a result of costly mortgages. But it is in fact the result of subsidised mortgages having forced commercial mortgages out. Why take a market loan when a subsidised one is available? Why would banks be willing to issue more market-based mortgages when the growth in credit – that is the credit risk they are willing to accept in terms of mortgage lending – is being replaced by subsidised lending? That is sending market mortgage rates higher, among other things. Unfortunately, if anyone pays a low rate, someone else is inevitably paying a higher one. A return to the rate of 2019 without detriment to the mortgage volume is only possible through a targeted programme of subsidised lending and lower inflation.
Now on to corporate loans.
They are now growing at a moderate pace. And yet credit is best considered alongside corporate bonds that banks purchase. They are the channels through which the banking sector finances the real economy. This financing grew by ₽11 trillion in aggregate, and that is no small amount. It disproves the view that credit is not universally available or that our policy is excessively tight. The banks have increased ruble financing of the economy by as much as ₽55 trillion over the last three years (including household loans). That suggests banks ensure that the financing of the economy is sustainable.
Let me stress that banks are mostly extending long-term loans that may be used to finance investment programmes. This slide shows that the share of long-term credit in bank portfolios is invariably growing steadily. That is, every ruble of short-term credit comes with three rubles of credit with a maturity of more than one year. For all the decline in real terms, the volume of investment that is financed primarily from retained profits is still a quarter above its 2021 mark. Total investment in 2025 was ₽42.6 trillion. You will appreciate that this is a very material value.
In a high-rate environment, the Government is making efforts to support individual sectors through subsidised loans. It is imperative that this support is available primarily to those who deliver productivity gains, considering that productivity growth is the focus of economic expansion, and by the same token, an enabler of lower inflation.
Let me now address other work streams of the Bank of Russia’s activities that the Duma has consistently highlighted.
We received many questions about fraud, which comes as further evidence of deep public concern. I am grateful to you deputies for the swift and decisive legislative measures you have adopted. They have all delivered very good results. Banks are now preventing a huge number of attacks.
As many as 20 million people activated self-bans on loans – another legislative measure you adopted. Each month, about one million people are still activating this self-block. Some disable and then reactivate it. In this context, we support the idea of banks reminding borrowers of their right to self-bans. These reminders would do no harm in a loan approval process.
The available cooling-off period before a loan is disbursed came as another regulatory innovation last year. Immediately after its introduction, credit fraud moved to decline, falling 40%.
The cooling-off rule also covers money transfers, saving huge amounts of money for people. The ‘dual authorisation’ option was put into law; we also put in place countermeasures against droppers, who act as intermediaries withdrawing stolen money. Most of what can be done through banks is being done, and you can see that fraudsters are being forced to switch to cash as long banks scrutinise cashless transactions.
What we think is critically needed is a package of measures on the telecom operators’ side. We must bring about a system of two interconnected lines of defence: operators scrutinising every call, and banks with their own toolsets. What is the course of action for the operator that detects a fraud attack? Believe me, they do have the capability to detect it. Rather than merely inform the banks, the operator should terminate the connection so that the client never falls under fraudsters’ influence. That line of defence is still missing, and we hope that this gap is filled once the Antifraud 2.0 package has been adopted.
Now on to investor protection. Our primary objective was to significantly reduce the number of complaints in several tricky areas, including tied selling in issuing loans and unfair sales practices (misselling). We succeeded in this. As you can see, reducing the number of complaints is not an end in itself, but still a key performance indicator for us.
Incidentally, complaints about cyber fraud from bank customers are down, which is a good sign. In the January to February period, this number fell almost by half YoY.
Your efforts enabled us to obtain a powerful tool for maintaining market discipline: I mean the multiple increase in fines for banks violating consumer rights. Previously, these fines were trivial.
Another discussion concluded with a decision when deputies adopted the regulation of instalment plans, and the law will be in effect beginning from next week. Instalments are household liabilities that are similar to loans, and information about them will be recorded in credit histories. What we believe should be the next step is mandating all creditors to take this information into account when issuing loans. We look to your support of this draft law.
Let me now turn to something important for the 15 million people who are microfinance customers. There are indeed 15 million such people.
In my report last year, I presented the concept of microfinance market reforms. Almost a year’s effort went into this law. It has now been adopted and we can discuss some specific steps.
It took just a few days, beginning in April, for maximum overpayment on loans to decline from 130% to 100%. That means that whatever interest, fines or penalties apply to a loan, their total cannot exceed the original loan amount. You borrow 10,000, you repay no more than 20,000 – even with late payments. You may remember the cap we began with was 400% – five times the borrower’s debt. We have been consistently lowering this cap.
Then, it should take us two stages to institute a rule that an individual is only entitled to one costly loan at a time, and that there should be a cooling-off period between the time when one costly loan is repaid and another one is taken. Our task is to break the chains of costly loans, as they turn into spiralling debt for borrowers.
Deputies asked how we can be certain this does not play into the hands of illegal lenders. We recognise that risk and agree that the fight against illegal lenders must be strengthened in parallel.
What we are already doing is detecting them and assisting law enforcement in investigation and evidence gathering. Last year, we found more than one thousand illegal lenders. Our cooperation with Rosreestr and the Federal Bailiffs Service enabled more rapid identification of schemes involving housing collateral. These are the most dangerous wrongdoers. They rob individuals of their homes and their money.
What we still need is the ability for law enforcement to apply tough measures, and as quickly as possible, to the most ‘prolific’ and large-scale illegal lenders. Such amendments are being elaborated as part of the legalisation programme for the economy.
Now on to a more positive area: payment instruments.
Last year, the share of non-cash payments totalled 88% – one of the highest rates globally. This is evidence of our leadership in payment technology.
The adoption of the universal QR code law was well-timed, and QR code payments are now becoming increasingly common. You remember the clash over whose code to use. The law ensures a constructive approach to this competition: there is one QR code, but the consumer picks a payment method, be it through their own bank or the Fast Payment System, or perhaps in instalments or with the digital ruble (in the future). The choice will be based on the available cashback options, convenience, and supplementary services. This model has proved successful across the globe.
We rely on the Mir card platform to develop a model for direct social payments from the budget (based solely on the card number), that spares the bother of paperwork involving account details and a wait for the bank to process the payment. Over the past year, the volume of payments under this model has grown sevenfold.
Furthermore, regions draw on Mir cards to provide digital certificates for some goods and services, for example convalescent care products for the disabled. The past year has seen a twofold rise in the number of regions that rolled out this model, and there are 12 of them. This is crucial.
Together with the Government, we intend to go further still and make Mir the single access point for all social benefit recipients. This will be an advantage for people. For example, pensioners could make use of their travel privileges, or buy subsidised medicines by paying with their cards. We plan to begin a pilot of this project before the end of this year.
All payment methods that are alternatives to cards are steadily increasing their share, including the Faster Payments System, thanks to its low fees and convenience.
Deputies asked many questions about a digital ruble, including about its security and benefits to households, businesses and the state. We sought to offer comprehensive answers. I will give an account of only our preparatory work. It is going to plan.
As instructed by the President, jointly with the Ministry of Finance, the Treasury and the regions, we have successfully tested cases of payment from the budget system. That was an important stage. We tested automated control over the targeted use of budget spending. You know how many resources go into that control, and yet abuses still occur. Digital ruble technology ensures this control costs less and is more effective. Pilots in several regions make a convincing case for that.
By September, as required by law, major banks will be ready to offer digital ruble services to any of their clients wishing to use such services. Let me make it clear: the digital ruble will be mandatory for banks and merchants – that is for the infrastructure, but not for citizens. No one will have a digital ruble account opened automatically. The digital ruble will have its advantages: free transfers for individuals, minimal fees for business, and user-friendly services. But if a person does not want it, they will simply not open a digital ruble account. We have no intention of fast-tracking its adoption, and we intend to make it truly attractive for households and businesses.
Over recent years, we have been working to create a sanctions-proof system of cross-border settlements. To this end, we are developing new payment methods and payment routes and helping businesses be flexible. It was clear last year that our efforts came to fruition. The first half was relatively calm in terms of payments, but the summer and autumn saw further, unprecedented, pressure. Foreign banks working with Russian companies were increasingly sanctioned. Last year, major Russian oil exporters were placed under blocking sanctions.
Nevertheless, we continue to build momentum. This is partly the result of the increased role of national currencies in settlements – a remarkable expansion over four years. Certainly, there are still payment problems, and they are unavoidable given current sanctions. Yet for business, they have largely gone by the wayside.
And another important area of positive change is compulsory motor third-party liability insurance (OSAGO). For the second consecutive year, the average price of an OSAGO policy has declined, even as the average claim payout has risen. Notably, there was not a single question about OSAGO among those submitted for this Report. That in itself can be taken as a good sign.
We have made progress in tackling fraud, by which I mean staged accidents, document falsification and so on. Not long ago, twelve regions were in the red zone. By early this year, only two remained there: the Republic of Ingushetia and the Novosibirsk Region. However, the Novosibirsk Region has seen a crackdown on fraudsters in recent months (as we can see from criminal cases), and we have every intention to reduce its local coefficient. A successful anti-fraud campaign suggests that bona fide drivers will not have to pay extra for fraudsters’ actions.
Let me conclude by saying a few words about our interaction with the Government, on which a great deal depends.
Above all, I refer to interaction between monetary and fiscal policy.
What exactly is it? In making our decisions, we take as our starting point the Government’s published budget plans, recognising that the Government needs room for manoeuvre in ever-changing conditions to address priority tasks and to develop a supply-side economy. The Government fully shares the value of low and predictable inflation. In making its decisions, we can see that the Government analyses the likely response of monetary policy as a key variable. That synergy, that connection, is in essence fiscal and monetary policy coordination. This is the configuration that enables it to deliver macroeconomic stability, indispensable to both business and households.
In my view, we have achieved a similar common understanding of priorities with the State Duma. We had many arguments and debates throughout the years of this Duma. In those exceptional circumstances, it could hardly have been otherwise. Yet, those same exceptional circumstances helped us work hand in hand and focus on results. I have checked, and see that we have worked on as many as 350 draft laws during this convocation; they all relate to our field. Last year alone, we worked on 80 draft laws. I thank you for your invaluable support.
These are the key points I wanted to make. Thank you.