Russia's largest banks just hiked savings rates as high as 21% to encourage Russians not to withdraw cash

• Russia's largest banks Sberbank and VTB hiked savings rates as high as 21%, state media reported.
• The increases appear aimed at encouraging Russians not to withdraw cash.

Russia's two largest banks have hiked savings rates as high as 21% in a bid to encourage Russians not to withdraw cash.

After Western sanctions rocked Russia's economy and prompted a collapse in the ruble, Russians were pictured forming long lines at ATMs to withdraw cash, including foreign currency. The mass withdrawals led to fears of bank runs, which can destabilize consumer and business lending and hurt the broader economy.

State-owned Sberbank, Russia's largest lender, said Wednesday it's raising rates on its SberDeposit Prime savings account to a maximum of 21% for one to three months, state news agency TASS reported, citing a press release from the bank. Insider was unable to access the release.

VTB Bank, Russia's second-largest lender, also said Wednesday it's raising savings rates as high as 21%, according to state and local media.

The savings rate hikes come after Russia's central bank on Monday more than doubled its base interest rate, to 20%, to stave off an even deeper collapse in the value of the ruble, which plunged to record lows.

Higher savings rates encourage customers to leave their money in banks, something that's crucial as the Russian economy is tested by the West's sanctions. Keeping cash in banks helps maintain liquidity and stability in the banking sector, thereby propping up the broader economy.

After Russia invaded Ukraine, countries and trade blocs including the European Union, the UK, the US, Canada, and Japan imposed sanctions designed to hobble Russia's economy. These include blocking some Russians banks from using SWIFT, the international payments system; banning transactions with Russia's central bank; restricting trade; and barring Russian aircraft from their airspace.

TASS said Sberbank's maximum savings rate on Tuesday was 18%. As of Wednesday, rates for its Classic SberDeposit account would be 20% for one to three months, TASS reported, citing the bank's press release.

Sberbank also raised interest rates on consumer loans, from between 12.9% and 21.7% to between 21.9% and 29.9%, multiple news outlets including RIA Novosti reported. VTB also raised consumer loan rates from between 5.9% and 13.8% to between 15.9% and 29.9%, the outlets reported.

Higher interest rates on loans make it more expensive for consumers and businesses to borrow money, which in turn raises the cost of goods and services.

Meanwhile, Sberbank announced Tuesday it would quit the European market "in light of the current situation."

"The group's subsidiary banks have faced an exceptional outflow of funds and a number of safety concerns regarding its employees and offices," Sberbank told Insider in an email.

It added that customer deposits remained insured but that Sberbank couldn't provide liquidity to its European subsidiary banks because of a directive from Russia's central bank.