Banks, in most countries, play a crucial role in providing financial intermediation between savers and those who demand credit. Providing low cost funds is essential for investment and growth while providing savers with a good return on their investments. In order for bank intermediation to be effective in economic growth, such intermediation should be done in an efficient manner. So, an efficient functioning banking system is essential for sustained growth. The efficiency of bank intermediation in the Russian Federation has not been addressed before. In this paper, we assess the level of efficiency of the Russian banking industry using bank specific data. We estimate the level of bank efficiency using a standard stochastic frontier model. We find the efficiency level of the Russian banks low compared to international evidence on other countries. Then, we estimate the contributions of different factors that influence the level of efficiency in the Russian banking system. The factors included in the estimations are bank specific factors summarized as CAMEL variables and macroeconomic risk factors such as interest rate and exchange rate risk. We find that equity to asset ratio, ratio of non-performing loans to total loans, interest rate volatility, inflation rate volatility and real effective exchange rate volatility significantly affect intermediation efficiency of banks in the Russian Federation.