Transcript of the start of the meeting:

Vladimir Putin: Mr Gref, I have just spoken with the Kurgan regional governor. Among other topics, we discussed the local programme for housing construction to accommodate young families. As far as I know, your bank is engaged in several similar programmes. How are they progressing?

German Gref: Mr Putin, we have preserved three essential component parts of mortgage crediting, with the greatest attention to young family crediting. The bank lent 16.5 billion roubles at 14-15.5% interest in the first quarter. We have started signing contracts with Russia's constituent entities on subsidising loan interest.

Vladimir Putin: I talked to you about one such entity yesterday.

German Gref: Sberbank has signed such a programme with Tatarstan, and we hope to sign one with the Republic of Udmurtia next week. Preparatory work on it is finishing. After the Kurgan governor's visit with you, he and I decided to draft an agreement following available prototypes within three weeks.

Vladimir Putin: Constituent entities subsidise up to 10% of interest. Am I right?

German Gref: 5-8% on available contracts, though the Kurgan governor says the region might subsidise a bit more, up to 10%.

The programmes are very popular, and the bank runs smaller risks when a region subsidises interest. The arrangement spectacularly facilitates young families' access to such loans. We can proceed from two or three initial programmes to make them a pattern for other regions that want to include the programme in their budget.

Vladimir Putin: Sberbank is, in fact, Russia's leading bank-a majority of private deposits are in it. As we have said previously, the bank should offer private clients various forms of service.

German Gref: Among other topics, I was going to tell you today how we were working on a programme to simplify and speed up private lending and streamline other services. We elaborated a pioneer technique last year that spectacularly enhances banking office efficiency. 46 offices in all parts of Russia have accepted it. The shift demanded major changes in all standards but increased labour efficiency by an average of 50%. Moscow offices are working on two test variants, and we are observing major improvements during rush hours, with an average wait time of four minutes per client. Before the new system was implemented, a client had to wait in line for 28 minutes on average.

We intend to shift 2,132 offices all over the country to the new system within the year-that is, about 25% of our urban offices, and no less than 85% of urban offices will make the shift before the end of 2010.

We are implementing another cutting-edge technology-what we call "credit factories". They are working already-for two kinds of loans nationwide and four in Moscow and St Petersburg. Tomorrow, we are launching new credits for small business development, up to a million roubles, in Moscow. If it is successful, we will spread the pattern to Central Russian Bank starting in June. We want to spread such mini-credits, up to a million roubles, throughout all of Russia before the year ends. Sberbank accounts for close to a half of the loans given to small businesses countrywide, which is a major help to small entrepreneurs looking to develop their businesses.

Vladimir Putin: What makes such loans so attractive?

German Gref: The "credit factory" is quite a new technology. Previous lending was based on manual controls, to put it figuratively-we evaluated the applicant's solvency and the loan committee made an appropriate decision. Estimations and decision-making took us anywhere from 14 to 30 days. With the new technique, it takes us no longer than two days to consider an application, and a mere five days from application to loan reception.

Our labour efficiency has increased five-fold. Most importantly, we have started making contracts with the Pension Fund. We use the credit history bureau, which we did not do previously. We use other banks, databases, and open databases pertaining to client solvency. The resulting prospective borrower's profile is presented to two independent experts, who then make the decision. One of them is the underwriter, who never sees the applicant but receives all relevant information, and the other is the credit inspector, who makes negotiations with the applicant. A loan is granted automatically if both experts make a positive decision.

Vladimir Putin: Are you not afraid that the pattern will make loan preparations too hasty and superficial?

German Gref: We launched the system a mere six months ago, so our database is still quite small in comparison with the scale on which Sberbank is working. We have made only several thousand loans. There are no arrears for the half-year. As the experiences of other banks and countries have shown, similar systems improve the quality of the credit portfolio. Our credit factory experience demonstrates that the intelligent automated system turns down about half of the applications that were previously approved, since we now have access to negative information from various databases we had not consulted before.

The human factor was very strong in the past. Now, corruption-related problems are receding spectacularly. This is an extremely topical issue during a crisis. Now, analyses have become much more objective and clients have a greater chance of appeal against refusals. We are removing the red tape, and applications are considered much more quickly, which is the most important factor.

To be sure, we cannot spread the system to all loans; it would be impossible for corporate loans, which always require individual consideration. I don't think we can use the system for mortgages just yet. As for the rest, we intend to shift to the new arrangement within two years.

Vladimir Putin: What are the current depositing trends? Are roubles or hard currency preferred? What are the most common investment trends?

German Gref: Trends have been changing since the middle of March. First, the money inflow emphasis is shifting ...

Vladimir Putin: So there is an inflow.

German Gref: Yes. March and the first 15 days of April brought in more than 30 billion roubles from private depositors. A steady inflow started more than a month ago-and it is a rouble inflow. The dollar inflow has shrunken notably, while the euro is slightly outpacing the dollar. Rouble deposits have been steadily progressing since the rouble became stronger.

Liquidity is no longer alarming-not what we had throughout last autumn and in January and the beginning of February. We can say that the liquidity problem has been settled.

Vladimir Putin: I remember asking you whether you needed support from the Central Bank. You said then: "We don't need it. We will want and see-the situation demands an analysis first."

German Gref: Liquidity is quite controllable for now. More than that, if this year brings stability to the rouble rate and thus to other export price indices, we might possibly get through such critical months as October without overloading the banks.

We might have no problems with liquidity this year if we have a degree of stability. Problems may arise with the banking capital. As for Sberbank, we will do everything we can to get through with the smallest possible losses. By all appearances, we will not need capitalisation before autumn, when we will be able to forecast further economic trends.

Vladimir Putin: Do you need anything now?

German Gref: Not yet.