MOSCOW, Dec 1: Russia’s Bank of Development has started placing 200 billion roubles ($8.21bn) of budget funds on the interbank market to support the liquidity of the banking sector, Finance Minister Alexei Kudrin told Reuters.

“The bank has started the placement, around 40 billion roubles have already been placed,” Kudrin said. “We will continue placing the rest of the funds. The government has decided that a total of 200 billion roubles will be placed.” Kudrin said the budget funds aimed “to support liquidity on the interbank market”.

“These will be interbank loans,” he said.

Kudrin said there would be some limits on access to this cash for local banks, depending on their ratings. “The number of the banks admitted to the placement of these funds is around 30,” he said.

The Russian banking system has been suffering from a liquidity shortage amid a global credit crunch since August, prompting the central bank to provide billions of roubles of liquidity.

Russia’s repo operations hit a new record of 300 billion roubles ($12.32bn) in one day on Wednesday after the central bank injected 88.52 billion roubles into the banking system in its second auction.

VTB analyst Nikolai Kashcheyev hailed the injection of fresh cash into the money market but said such a move would probably not be enough to reverse the trend.

“If a daily repo turnover is 300 billion (roubles), then ...well, of course you can say thanks for those 200 billion (roubles) -- there is never too much money,” he said. “But I wouldn’t say this is something earth-shaking.”

—Reuters