The net sales of national savings certificates have more than doubled in the first two months of the current fiscal year (FY) mainly due to lower interest rate, offered by the scheduled banks, on deposits.
The government's net borrowing through selling savings tools jumped by 100.82 per cent to Tk 74.55 billion during the July-August period of FY 2020-21 from Tk 37.12 billion in the same period of the previous fiscal year, according to the official data.
"Eyeing higher returns, savers, particularly small ones, now prefer investing their hard-earned money in the national savings certificates (NSCs) to depositing the same with the banks," a senior official of the Bangladesh Bank (BB) told the FE on Saturday.
The government's savings schemes pay around 11 per cent annualised profits, while the weighted average interest rate on bank deposits came down to below 5.0 per cent in August 2020.
The weighted average interest rate on deposits fell to 4.95 per cent in August from 5.02 per cent a month earlier. It was 5.37 per cent in April last.
In April 2020, the weighted average interest rate on deposits dropped to 5.37 per cent from 5.51 per cent in March following implementation of the single-digit interest rate in the banking sector.
The issue of higher sales of NSCs was discussed at the Cash and Debt Management Committee (CDMC) meeting held at the Ministry of Finance last week, according to the BB official.
Currently, an individual is allowed to invest a maximum of Tk 5.0 million in different schemes, but the ceiling is yet to be formally announced by the government. As a result, some investors face harassment, a senior executive of a leading private commercial bank (PCB) told the FE.
"Most banks are now offering a maximum of 6.0 per cent interest for fixed deposit receipts (FDRs)," Md Abdul Halim Chowdhury, managing director (MD) and chief executive officer (CEO) of Pubali Bank Limited, told the FE while explaining the reasons behind the higher sales of NSCs.
The investors, particularly small ones, are now purchasing the NSCs after complying with the government's rules and regulations just to get higher return on their investments, according to the senior banker.
"We expect that such higher sales of NSCs will continue in the near future," Mr. Chowdhury predicted.
On the other hand, the net sales of national savings certificates dropped by more than 71 per cent to Tk 144.28 billion in FY '20 from Tk 499.39 billion a year ago mainly due to the automation of its selling process.
The sales of savings certificates normally increase during the May-June period of each fiscal year as taxpayers seek to get income-tax benefits.
Net sales, however, rebounded in June 2020 at Tk 34.17 billion, up from last year's Tk 32.08 billion, the official data showed.
The government has already installed an online database under the Public Expenditure Management Strengthening Programme to see whether savers abuse the savings opportunity by exceeding the investment limit or making 'benami' (fictitious) investments.
Under the programme, savers are required to produce their national identity cards, bank accounts, mobile numbers and tax identification numbers (TINs) while buying savings tools and bonds.
Even those who have already invested in such schemes will need to submit similar documents to draw yields or encash mature investments.
Besides, the savers need to make payment in cheque for purchasing saving certificates of over Tk 50,000.
Four savings tools -- Five-Year Bangladesh Sanchayapatra, Three-Monthly Profit Bearing Sanchayapatra, Family Savings Certificate and Pensioner Sanchayapatra -- are much popular among the savers in Bangladesh.
The government has already set its borrowing target from the savings instruments at Tk 200 billion to meet the budget deficit partly for FY '21.
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