Limit likely on institutional investment in savings tools

The government contemplates containing institutional investment in savings instruments as its borrowing from the non-banking sources bloats over the limit.
Officials said the Department of National Savings (DNS) recently sent in a proposal to the government to restrict investment from provident fund of autonomous bodies and structured local and multinational companies (MNC) in the government savings tools.
Such institutional investors account for more than 80 per cent of aggregate investment in the five-year-term Bangladesh Saving Certificates.
However, the DNS allows the institutional investors to invest only in this five-year savings tool, leaving the others for public subscription.
DNS officials said the government's net borrowings from savings certificates may not surpass its target in the event of limiting scope of institutional investment.        
The DNS recently sent in its proposal to the Internal Resources Division (IRD) for putting a brake on the institutional investment in savings certificate.
The DNS, however, recommended rationalizing the ceiling on savings certificates by way of disallowing investment by underage and joint- name investors to keep the net sales from the sector at a rational level.
Institutional investors are cashing in on the high yields of savings certificate. Besides, people are putting their money in the savings tools under the names of their several female family members, joint names and underage children.
Such investment spree in these high-stakes government borrowing tools propped up a recent rise in their net sales, the sources said, as interests on bank deposits have shrunk into a negative realm. According to the DNS, institutional investors can only buy '5 -Year Bangladesh Sanchayapartra'. There is no investment ceiling on this savings scheme for institutional investors. The savers are also enjoying auto- reinvestment facilities.
The rate of yield is 11.28 per cent on the savings certificate whereas banks offer up to 5.0 per cent on term deposits - considered a negative return when adjusted with inflation.
For these aforesaid reasons, the net sales of the Bangladesh Savings Certificate have surged significantly in the last five years.
The DNS data show the net sales of the 5 -Year Bangladesh Sanchayapartra amounted to Tk 37.88 billion in the Fiscal Year (FY) 2015-16. On the other hand, it registered a negative growth of Tk 9.14 billion in the FY 2011-12.
Only 20 per cent of the investors who invest in the 5-year Bangladesh Sanchayapartra are individual investors. Currently, the number of institutional savers is 200. Most of the total savers are government organisations, officials mentioned.
A senior official of the DNS told the FE that they sent the proposal to the IRD as the government borrowing from the sector had already surpassed the current revised fiscal target. The IRD asked for proposal from the DNS as to how to discourage investment in this sector.
They also sent the same recommendations to the Finance Division two months back, he added.
Asked whether the government had any plans to make use of Taxpayer Identification Number (TIN) mandatory for purchase of savings tools, the official said: "So far, there has been no such initiative."
He also observed that such measures would not be very helpful in finding out real beneficiaries, as getting a TIN is not that tough. Besides, family members also can have TINs.
The savings official noted that the very target group under these financial derivatives - small savers - would be affected if TIN is made mandatory. "The main aim of the savings department is to bring small savers, women, physically challenged and aged people under financial security," he said.
However, experts and some compliant taxpayers pointed out that having TIN is mandatory for opening bank accounts, beneficiary owners (BO) accounts and for all other purposes to ensure transparency. Then, they questioned, why not it is made mandatory for investment in savings certificates. The application of such a condition might help reduce 'benami' investment in savings tools.
In the bank accounts, bank depositors have to pay 5.0 per cent penal tax at the time of withdrawal profits if TIN numbers are not furnished beforehand. They called it a 'discriminatory' government measure.
When contacted, Bablu Kumar Saha, Director-General (DG) at the DNS, admitted that they also came to learn that people were purchasing savings certificates, especially Family Savings Certificate (FSC), under different names. They were putting money in the savings tools in the names of their several female family members.
After introduction of online systems, he said, such irregularities will be completely stopped as there will be a database on savers in the department. "We have already introduced e-Savings Software at our 34 bureaus. The remaining 37 will be brought under the system by June this year," he added.
Within a year they will go for full-fledged digitised systems, if they get necessary support from the finance division.
The DNS DG, however, said they did not get adequate fund from the finance ministry to buy computers. "So far we could buy only 27 computers against the requirement of 118 for our office," he added.
Small savers lamented that they have to carry a book for depositing and withdrawing monthly installment of savings tools in an era of digitization. It is still a manual system and hassle for senior citizens to carry books of DNS every month to the banks.
Because of gigantic sales of savings instruments, the government has already revised upward its borrowing target to Tk 280.00 billion from the original benchmark of Tk 196.10 billion.
Even that lofted mark already sank under a surge. The government's net borrowings from savings instruments stood at Tk 332.82 billion during the eight months of Fiscal Year (FY) 2016-17.
The net investment in the tools was much lower at Tk 198.90 billion in the corresponding period of the previous fiscal year, 2015-16.
Interest payments on the public borrowings increased to Tk 97.80 billion in the July-February period of the current fiscal from Tk 70.96 billion in the corresponding period of previous year.  
Officials said more than 25.0 million (2.5 crore) people had invested in government savings instruments since independence.
doulot_akter@yahoo.com , arafat_ara@hotmail.com