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Govt to review yield rate of postal savings scheme

Public outcry impels finance minister to relent

FE REPORT | February 20, 2020 00:00:00

Finance Minister AHM Mustafa Kamal said on Wednesday he will reconsider the yield rates of postal savings scheme, which were halved last Thursday.

"I will look into it," he told reporters after a meeting of the cabinet committee on public procurement at Bangladesh secretariat.

He said the government wanted to bring interest rate of bank loans to a single-digit and the yield rates of postal savings scheme were slashed as part of that move.

"Unless the banks can mobilise deposits at low rate, how will they lend at low rate," he asked.

Mr Kamal said at first, the government put a curb on buying savings instruments by individuals up to Tk 2.5 million, which was later raised to Tk 5.0 million.

For a joint account holder, the limit is Tk 10 million.

He said the savings instruments are not accepted globally because they do not have any contribution to the economy.

Still, Mr Kamal said the savings instruments are there so that government could tap money when needed.

"Our main goal is to bring interest rate to a single digit and that is a big task. We have to intervene in every component related to it," he said.

The minister said savings instruments were introduced to provide support to the marginalised groups, but these were grossly misused by wealthy people.

Some people even bought savings instruments worth Tk 200 million, which is unacceptable.

There was no control over it, he said, adding for this reason, the government imposed a limit on it.

He said when cap was put on the procurement of savings tools, many people switched over to postal savings scheme with a yield rate of nearly 12 per cent.

The yield rate of postal savings scheme was reduced to bring uniformity, Mr Kamal added.

However, since many people are talking about the change, "Let's see what can be done."

"But if we revisit the rate and a large volume of fund heads towards postal savings scheme, our objective will fail," he said.

"We can't let the single-digit scheme fail. So, we have to strike a balance between the two and we will have to see which one is beneficial for us, for the people," he said.

Asked whether he would cut the interest rate of savings certificates, he said he alone cannot do anything and he has to discuss with his team.

Steps will be taken so that none opts to buy savings instruments instead of depositing money in the banks, he said.

The minister noted there is no country except Bangladesh where depositors get interest at such a high rate keeping money in banks. Rather, the depositors pay money to banks in the form of various fees.

"Why will we have to pay so much interest?" he asked.

"We are committed to providing funds at lower rate or effective rate and that is our commitment to the businessmen," he said.

"Otherwise, there will be no industrialisation here, no business here, and our children won't get jobs," he added.

Replying to a question, the minister said the bank commission will be formed and work is underway in this connection.

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