It has been dubbed quantitative easing, Russian-style. A surge in central bank lending to Russian banks is sustaining rapid loan growth, but also risks fueling inflation and a potential credit bubble.
On the face of it, Russia's central bank has been acting tough. To clamp down on inflation it has recently hiked interest rates - in stark contrast with the ultra-loose monetary policies seen in western economies.
But while Russia has tightened the monetary screws with one hand, it has been opening the flood gates with the other.
They are sending conflicting signals, said Natalia Orlova, chief economist at Alfa Bank. They are raising interest rates ... and at the same time they continue to fund loan growth.
Total credit extended by the central bank has mushroomed to 2.5 trillion roubles ($80 billion) as of Nov. 1 from negligible levels in mid-2011, and is approaching levels seen at the height of the 2008-9 financial shock.
And the central bank's role in financing banks looks set to keep growing as Russia's authorities endeavour to halt a possible slide in bank lending that would deepen an economic slowdown and undermine support for President Vladimir Putin.
At least in theory, more central bank funding for banks is a way to prop up the economy by encouraging banks to lend, supporting spending by companies and consumers.
At the root of the central bank's growing lending is an intensifying squeeze on banks' market funding. Overnight interbank lending rates have risen steadily from below 3 percent at the start of 2011 to around 6 percent today.
Many bankers blame the central bank. Last month German Gref, the head of Russia's largest bank Sberbank, criticised its September rate hike, arguing that higher borrowing costs would crimp lending and damage economic growth.
But the deeper roots of the funding shortage lie in Russian banks' own behaviour.
The cause of the problem is that the banks have deployed more liquidity than they have attracted in the form of customer funding, said Yaroslav Sovgyra, associate managing director at credit rating agency Moody's in Moscow.
In the first 10 months of this year, total lending by Russian banks grew by 15 percent, outpacing the 9.4 percent increase in client deposits, according to the central bank's monthly banking sector review.
The shortfall means that banks are instead turning to the central bank to fill the gap. Moody's predicts that the share of central bank funding in banks' liabilities, now some 6 percent,