Russian banks, including private ones, may receive $40 Billion from the Government for recapitalization. But experts warn many healthy regional banks may close as the result of the policy.

The government is ready to allocate $40 Billion in aid for Russian banks. Up to 50 banks may receive state money for recapitalization through subordinated loans according to Prime Minister Putin, including private ones.

“The state is ready to give up to $7 billion to commercial banks in a form of subordinated credits but only if private investors also provide money.”

Sergey Guriev, Rector at the New Economic School, believes the harsh conditions are designed to select strong and healthy banks and help them to survive.

“I think that’s a very smart move, because we don’t want to bail out banks which have failed completely. The Government wants to send a signal that the Government feels some responsibility for the crisis, but it wants to make sure that the responsibility is shared. And the bankers who will not be able to find cash to inject into capital will not be helped by the Government.”

However some market watchers warn this policy may leave only 50 players in the Russian banking sector bailed out, and many solid regional banks left to sink.

Meanwhile Russian business is still struggling to get loans and many top managers, including David Yakobashvili Chairman of Wimm-Bill-Dann are pessimistic about whether the new measure will change the situation.

“No I don’t believe that it will be changed. Very well known companies, they cannot get this credit because of many new obstacles which are created by the banks.”

But Andrey Kostin, Chairman of VTB bank points out that before the crisis Russian companies borrowed mainly abroad and not from the banks.

“Russian banking sector, no matter how much we increase our lending, will not be able to satisfy all the needs, because originally, if you take, for example, investment programs of Russian companies only 13% of the money came from the Russian banking sector.”

VTB says last year its loan portfolio grew by $33 Billion, of which $32 Billion were provided by the state. That shows that even when its working smoothly, the domestic capital market can't satisfy companies’ capital needs.