Investment in savings tools up 79pc in two months
Sunday, 19 October 2008
FE Report
Investment in government's savings tools increased sharply by 79 per cent in the first two months, showing a growing public interest in such risk-less instruments.
Small savers made net investment worth Tk 5.75 billion in July-August period. The amount was Tk 3 .21 billion in the corresponding period last year.
Such investment in government savings tools dropped last year mainly due to sluggish trend of economy and increased flow of fund to the stock market.
The small savers invested around Tk 26 billion in the last fiscal, which was Tk 42 billion in 2006-07.
The National Saving Directorate (NSD) under the finance ministry has nearly Tk 4.21 billion in net investment in July and Tk 1.54 billion in August. Net investments were Tk 2.52 billion and Tk 698 million in the corresponding period last year.
"Usually, investment in savings tools remains high in the first month of every fiscal as a number of people made investment in during the period before filing tax returns," a senior official of NSD told the FE Saturday.
Taxpayers having higher income usually buy the saving certificates in that period to get tax rebate, he said.
"Also, people have been facing some sort of uncertainty to invest their idle money following the global financial meltdown. We hope the internal investment of small savers will increase significantly this year following the instance," he said.
Declining trend in food and oil prices in the international market will reduce the cost of living and increase the volume of investment in risk-less saving tools, the official said.
In 2007-08, the overall investment in saving tools declined by 39 per cent compared to that of the previous fiscal as capital market's booming growth attracted a number of investors to divert their funds to the share market.
Officials concerned have also blamed the complex tax measures adopted last year as one of the major reasons for erosion in confidence of the small savers.
Sales of savings certificates are one of the main sources of government borrowings, as it needs large fund to manage its deficit budget. Any fall in the sales of savings instruments leads to higher government borrowing from banking sources.
In 2007-08, the National Board of Revenue (NBR) imposed 10 per cent tax at source on saving instruments, which will be deducted from the interest amount exceeding Tk 150,000.
After imposition of the measure, the small savers were almost reluctant to invest in the government savings tools.
In September alone, the sales of savings instruments dropped to a meager Tk 220 million, the lowest in recent memory.
Also, the government's massive crackdown last year also created panic among some of the people, who felt shy of investment in government savings tools, the official said.
Net investment in savings tools was Tk 42 billion in 2006-07, Tk 30 billion in 2005-06, Tk 25 billion in 2004-05, Tk 39.05 billion in 2003-04, NSD data shows.
Investment in government's savings tools increased sharply by 79 per cent in the first two months, showing a growing public interest in such risk-less instruments.
Small savers made net investment worth Tk 5.75 billion in July-August period. The amount was Tk 3 .21 billion in the corresponding period last year.
Such investment in government savings tools dropped last year mainly due to sluggish trend of economy and increased flow of fund to the stock market.
The small savers invested around Tk 26 billion in the last fiscal, which was Tk 42 billion in 2006-07.
The National Saving Directorate (NSD) under the finance ministry has nearly Tk 4.21 billion in net investment in July and Tk 1.54 billion in August. Net investments were Tk 2.52 billion and Tk 698 million in the corresponding period last year.
"Usually, investment in savings tools remains high in the first month of every fiscal as a number of people made investment in during the period before filing tax returns," a senior official of NSD told the FE Saturday.
Taxpayers having higher income usually buy the saving certificates in that period to get tax rebate, he said.
"Also, people have been facing some sort of uncertainty to invest their idle money following the global financial meltdown. We hope the internal investment of small savers will increase significantly this year following the instance," he said.
Declining trend in food and oil prices in the international market will reduce the cost of living and increase the volume of investment in risk-less saving tools, the official said.
In 2007-08, the overall investment in saving tools declined by 39 per cent compared to that of the previous fiscal as capital market's booming growth attracted a number of investors to divert their funds to the share market.
Officials concerned have also blamed the complex tax measures adopted last year as one of the major reasons for erosion in confidence of the small savers.
Sales of savings certificates are one of the main sources of government borrowings, as it needs large fund to manage its deficit budget. Any fall in the sales of savings instruments leads to higher government borrowing from banking sources.
In 2007-08, the National Board of Revenue (NBR) imposed 10 per cent tax at source on saving instruments, which will be deducted from the interest amount exceeding Tk 150,000.
After imposition of the measure, the small savers were almost reluctant to invest in the government savings tools.
In September alone, the sales of savings instruments dropped to a meager Tk 220 million, the lowest in recent memory.
Also, the government's massive crackdown last year also created panic among some of the people, who felt shy of investment in government savings tools, the official said.
Net investment in savings tools was Tk 42 billion in 2006-07, Tk 30 billion in 2005-06, Tk 25 billion in 2004-05, Tk 39.05 billion in 2003-04, NSD data shows.