Payment of profit against savings tools up by 24 pc

The size of the payment of profit accrued on savings instruments of the government increased by more than 24 per cent in nine months of the current fiscal year (FY), compared to that of the last fiscal.
During the July-March period of FY 2014-15, the government paid Tk 70.51 billion as profit compared to that of Tk 56.55 billion paid during the same period of the last fiscal, Department of National Savings (DNS) data showed.    
The total target of paying profit against borrowing through the savings certificates has been set at Tk 98.77 billion for the entire FY 2014-15.
A significant rise in the government's borrowing using the savings tools has pushed up its debt servicing liability during the period, according to officials.
Following continuous rise in sales of savings tools, payment of profit against the government's borrowing through the sale of savings instruments increased in recent months, said a DNS official.
The net sales of savings tools stood at Tk 211.84 billion in the July-March period of FY 2014-15 whereas it was Tk 74.60 billion in the corresponding period of last FY.
Because of such higher sales, the government revised the target of savings tools sales. The proposed revised net target of savings tools stood at Tk 210.00 billion up from original target of Tk 90.56 billion in the current fiscal year.   
The official said reduction of yield rates on deposit schemes by commercial banks led to the rise in overall investment in the government's savings instruments.
Auto-reinvestment facility of some saving instruments is another cause for such a development, the official added.
Officials indicated that if the sales continue, the net borrowing may stand three times more than the fiscal target. And then the government will have to pay a big amount on servicing the debt.      
Presently, some banks are offering only about 7.0 to 8.0 per cent interest on their fixed deposit schemes. But the DNS is offering up to 13.45 per cent interest, encouraging people to invest their funds in the savings tools.
The government has already taken a decision to cut rates of yield on savings schemes to reduce its debt burden, said officials.
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