The Internal Resources Division (IRD) under the Ministry of Finance (MoF) published a notification to this effect. It shows up to 2.0 per cent of yields cut on almost all savings schemes.
The new rates, effective from Tuesday, will be applicable to procurement of savings certificates afresh while the existing owners will continue receiving previous rates until maturity of their instruments.
However, the government has also rearranged the yield rates on the basis of varied slabs of investment under the savings schemes.
The developments on the important aspect of financial front came only two days after the IRD had made the new rate of commissions of commercial banks against transactions in these borrowing instruments.
According to the circular, the savers will receive old rates of yield on up to Tk 1.5 million of their investment in different savings schemes.
They will receive 10.30 per cent yield on five-year-term Bangladesh Savings Certificate on over Tk 1.5 million, and 9.30 per cent on over Tk 3.0 million, after maturity.
Besides, the savers will gain 10.50 per cent yield on their family savings certificate worth over Tk 1.5 million and 9.50 per cent rate will be applicable to investment over Tk 3.0 million.
On the other hand, 10 and 9.0 per cent rates will be applicable to three-monthly profit-based savings certificate on the same amounts respectively.
The beneficiaries of pensioners' savings certificate will get 10.75 and 9.75 per cent. The savers of post office bank-term account will receive 10.30 and 9.30 per cent on the same amount respectively.
The rates of yield on four types of savings certificates were up to 11.76 per cent, earlier.
Besides, expatriate Bangladeshis will receive 11 per cent yield on their Wage Earners Development Bond over Tk 1.5 million, 10 per cent on above Tk 3.0 million and 9.0 per cent above Tk 5.0 million, after the maturity. The across-the-board previous rate was 12 per cent on this bond.
The rates of yield on post office bank savings account, US Dollar Premium Bond, and US Dollar Investment Bond remain unchanged.
Previously, the government had lowered rates on different schemes by1.0 to 1.5 per cent in 2015.
In December 2020, the government lowered the maximum investment ceilings of purchasing three types of savings certificates, namely, Five-Year Bangladesh Sanchaypatra, Three-Month Profit-Based Sanchaypatra, and Paribar Sanchaypatra (family savings certificate).
Following the reduction, small investors can now purchase these savings certificates up to Tk 5.0 million in total in single name, and Tk 10 million in joint names, whereas the previous ceiling was Tk 10.50 million and Tk 12 million respectively.
The IRD also lowered the maximum purchase limit for three types of savings bonds to Tk 10 million in total.
When contacted, Suraiya Pervin Shelley, joint secretary {Savings, Stamp) at the IRD, said the government's interest payments on savings schemes increased in recent days.
"Savings certificates were introduced to ensure financial support to the small savers. But large savers are purchasing savings tools as a safe investment," she said.
"For this reason, they are receiving a huge amount of yield from the sector," she said, adding that in this way idle money is increasing every year.
"The government encourages industrialization. So, the rates of yield on the savings instruments were reduced," the IRD official said further explaining the grounds for rate cuts.
She mentioned that considering the small savers' benefits, they kept unchanged the rates on the savings schemes up to Tk 1.5 million.
Small savers and pensioners expressed frustration over the rate cutbacks. They said many of them depend on these earnings.
Anowara Begum, a secondary school teacher, said, "A large part of my family expenses comes from the proceeds of the savings certificates."
Anowara, a widow, who invested in the Family Savings Certificate, said she had no alternative but to buy a savings certificate as other sectors, including banks, were not attractive for investing her money in.
Another saver, Md Manik, said he could not start any small venture due to the Covid-19 pandemic. So, the earnings from savings certificates helped him to maintain his family in this crisis period.
But now he felt frustrated as the earnings from the sector declined significantly.
Economists and analysts say that the rate cuts would create an impact on the small savers, especially those who are dependent on the gains from their investment in this sector.
Dr Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue (CPD), said the main beneficiaries of savings certificates are large investors like institutional investors in terms of total amount of their investment.
"If the government wants to reduce debt liability, it should make a move to discourage institutional savers," he said, adding that it is needed to separate large savers, and fix the rates for them same as bank rates.
And it is also necessary to streamline the investments made before the introduction of mandatory TIN certificates, the economist observed.
He, however, said small savers are more in terms of number, and they would be in trouble following the rate cuts.
Meanwhile, statistics of the Department of National Savings (DNS) showed the net sales of national savings certificates at Tk 419.59 billion in the Fiscal Year (FY) 2020-21 against a target of Tk 200 billion.
The net sales of the instruments were nearly three times higher in the last FY than that of the previous FY's (2019-20) Tk 144.28 billion, data showed.
The government made yield payment on savings certificates for the last fiscal year Tk 337.97 billion against its target Tk 330 billion.
The government has fixed the net borrowing target from savings tools at Tk 302 billion for the FY 2021-22.
Officials said the savers have invested more in these savings schemes due to lucrative yield rates.
The banks are providing interest rates on deposits up to 6.0 per cent while charging the lending rates up to 9.0 per cent.
The DNS in 2019 started taking necessary preparations to automate its services which are expected to complete by 2024. Then the clients are expected to get online services.
Currently, the taxpayer identification number (TIN), and national identification (NID) number are mandatory for purchasing the savings certificates.
Around 20 million investors are involved in this sector, DNS officials said.
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