Russian commercial banks are in big trouble.

While a minority of the more than 1,000 so-called banks now in existence here boast hard-currency capability, relative stability and impressive clients, most are unstable. Reports of haphazard loans and "pyramid schemes" abound.Liberalizing the banking system here (for ruble transactions) was not a bad idea initially, said one observer.

"At first the idea of 'credit societies,' where the banks here loaned each other money, was actually helpful," said Barbara Duvoisin, a management consultant with Price Waterhouse.

In today's economic chaos, however, it is a recipe for disaster. Sources say the banking system's day of reckoning is soon coming, quite possibly next month.

In the first week of April, the Russian central bank will raise ruble reserve requirements from 10 percent to 20 percent in an attempt to stabilize the under-regulated industry. This will require banks to have liquid assets equivalent to 20 percent of the their lending. With constraints like this, many Russian banks, already overextended, will fold.

"It's absolutely scary," said Peter Derby, president of DialogBank, one of the few major banks here with Western investment. DialogBank is a joint venture between JV Dialogue, a large U.S.-Russian joint venture, and three Russian institutions, including Moscow State University.

Other Western banks do exist, such as International Moscow Bank, a Russian- European joint venture. Branches of some major European banks, including Credit Lyonnais, are expected to open soon in St. Petersburg.

However, the Russian government has been slow in granting approval for new licenses, stunting the growth of the banking industry here. It's too little too late.

"Most of the Russian banks are in a very serious position; a significant amount are insolvent," said Mr. Derby, a former Wall Street banker with National Westminster.

Mr. Derby explained that most Russian commercial banks roll over their bad loans. In fact, the Russian accounting system has no provisions for bad debt.

The Russian banking community, after a barrage of borrowing last fall, is now faced with a credit crunch, given central bank actions. Today, lending rates exceed 40 percent, and banks only offer short-term credits, from three to six months. Economic uncertainty is taking its toll.

These conditions, in conjunction with the planned reserve hike, spell disaster for Russia's banks.

"Banks will be in deep, deep trouble if the credit crunch continues; this is like 1932," Mr. Derby said.

But the blame should not be laid just on the banks. Macroeconomic government problems created the credit crunch.

"People here do not understand the significance of monetary policy and the effect it has on the economy," according to Mr. Derby.