The government has moved to slash yields on savings instruments against the backdrop of an unusual rise in its borrowing from the system, officials said.
As part of the move, the Ministry of Finance (MoF) has sought information from the central bank on interest rates on fixed deposits of different tenures, offered by the non-banking financial institutions (NBFIs).
The Bangladesh Bank (BB) has asked the NBFIs to provide information regarding their respective interest rates to its Debt Management Department by January 15.
"We'll submit a report to the ministry after receiving information from the NBFIs," a senor BB official told the FE.
The issue was discussed at a meeting of the Cash and Debt Management Committee (CDMC), held at MoF on December 28, with Finance Division Senior Secretary Mahbub Ahmed in the chair.
"The ministry is set to revise the rates of yield offered to national savings certificates, considering the country's overall socio-economic situation along with debt servicing burden on the government," a senior official, who attended the CDMC meeting, told the FE Sunday.
He also said the interest expenditure of the government will go up significantly by the end of the current fiscal year (FY), 2014-15, if the abnormal trend in sale of savings certificates continues.
Net sale of national savings certificates increased by nearly 234 per cent to Tk 112.42 billion in the first five months of this FY, from Tk 33.69 billion in the corresponding period of the previous fiscal.
During FY 15 the government's net borrowing target from national savings schemes was Tk 90.56 billion to partly finance its budget deficit.
"Higher yield rates on the savings instruments are encouraging the small savers to invest more in the risk-free instruments," the official observed.
Currently, average interest rate on deposit, offered by the commercial banks, is around 8.0 per cent, while the rate for savings instruments is paid on an average 13 per cent, the market operators said.
Such abnormal borrowing from these instruments has helped the government keep its debt from the banking system at a negative level worth Tk 344.90 million during the first half (H1) of FY 15.
Besides, lower implementation of the Annual Development Programme (ADP) has also contributed to the negative borrowing from the banking system.
The government paid Tk 344.90 million more than that of fresh borrowing from the banking system during the July-December period of FY 15, against Tk 51.68 billion borrowed in the same period of the previous fiscal, the BB data showed.
During FY 15, the government is set to borrow a total of Tk 312.21 billion from the banking system through treasury bills (T-bills) and bonds to partly finance its budget deficit.
Under the arrangement, the government has decided to borrow Tk 198.24 billion from the banking system by issuing bonds, while Tk 113.97 billion will be borrowed through auction of short term T-bills.
Currently, three T-bills are being transacted through auction to adjust the government's borrowing from the banking system. The T-bills have 91-day, 182-day and 364-day maturity periods.
Furthermore, five government bonds, with two, five, 10, 15 and 20 years duration, are being traded in the market.
siddique.islam@gmail.com
Move underway to cut yield rates of savings tools
Siddique Islam | Published: January 12, 2015 00:00:00 | Updated: November 30, 2024 06:01:00
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