Savers lose interest in govt savings tools
Saturday, 30 April 2011
Arafat Ara
The net sale of savings certificates declined further in the month of March last primarily due to the hike in interest rates on deposits by most commercial banks, officials said. Many banks that are having a troubled time due to liquidity shortage have increased deposit rates to attract more funds. Citing figures, they said the net sale of the government's savings instruments dropped to Tk 240.40 million in last March from Tk 3.14 billion in the previous month. "Such a drastic fall in the net sale of savings tools is attributed to increase in interest rates on deposits by commercial banks," an official concerned Friday told the FE. Many savers are withdrawing their funds from savings tools before maturity being attracted to higher interest rates offered by banks. The official, however, predicted a further fall in the sale of savings tools in the months ahead. According to the central bank statistics, the country's commercial banks now offer interest rates up to 13.50 per cent on fixed deposits, while the interest rates on savings accounts ranges between 9.50 per cent and 10 per cent. But the government had earlier fixed the interest rates for savings certificates from 6.50 per cent to 11.04 per cent. Due to this large gap in interest rates between the two, the savers are not interested in buying savings tools. On the other hand it has imposed a 10 per cent tax on interest gained from all types of savings instruments barring the Family Savings Certificate, Pensioners' Savings Certificates and Wage Earner Development Bond. Officials of the Directorate of National Savings (DNS) said the declining trend in the sale of saving certificates has been noticed in recent months when the commercial banks started increasing their interest rates. Besides, they said, the interest rate hike by banks has led to a substantial withdrawal of invested funds from most of the saving tools. "Five savings tools out of 16 showed a negative growth this month," they added. The DNS sold savings certificates worth nearly Tk 16.48 billion (Tk 1648.23 crore) in the month of last March as against Tk 16.24 billion (Tk 1624.19 crore) worth of investment on the same encashed by the investors. But the sale of savings certificates was worth Tk 11.42 billion (Tk 1142.26 crore) and Tk 8.27 billion (Tk 827.93 crore) were encashed in February. The total net borrowing of the government from the savings instruments stood at Tk 26.36 billion (Tk 2,636.92 crore) in July-March period of the current fiscal which is much lower than the government fixed target this year, said the officials.
The net sale of savings certificates declined further in the month of March last primarily due to the hike in interest rates on deposits by most commercial banks, officials said. Many banks that are having a troubled time due to liquidity shortage have increased deposit rates to attract more funds. Citing figures, they said the net sale of the government's savings instruments dropped to Tk 240.40 million in last March from Tk 3.14 billion in the previous month. "Such a drastic fall in the net sale of savings tools is attributed to increase in interest rates on deposits by commercial banks," an official concerned Friday told the FE. Many savers are withdrawing their funds from savings tools before maturity being attracted to higher interest rates offered by banks. The official, however, predicted a further fall in the sale of savings tools in the months ahead. According to the central bank statistics, the country's commercial banks now offer interest rates up to 13.50 per cent on fixed deposits, while the interest rates on savings accounts ranges between 9.50 per cent and 10 per cent. But the government had earlier fixed the interest rates for savings certificates from 6.50 per cent to 11.04 per cent. Due to this large gap in interest rates between the two, the savers are not interested in buying savings tools. On the other hand it has imposed a 10 per cent tax on interest gained from all types of savings instruments barring the Family Savings Certificate, Pensioners' Savings Certificates and Wage Earner Development Bond. Officials of the Directorate of National Savings (DNS) said the declining trend in the sale of saving certificates has been noticed in recent months when the commercial banks started increasing their interest rates. Besides, they said, the interest rate hike by banks has led to a substantial withdrawal of invested funds from most of the saving tools. "Five savings tools out of 16 showed a negative growth this month," they added. The DNS sold savings certificates worth nearly Tk 16.48 billion (Tk 1648.23 crore) in the month of last March as against Tk 16.24 billion (Tk 1624.19 crore) worth of investment on the same encashed by the investors. But the sale of savings certificates was worth Tk 11.42 billion (Tk 1142.26 crore) and Tk 8.27 billion (Tk 827.93 crore) were encashed in February. The total net borrowing of the government from the savings instruments stood at Tk 26.36 billion (Tk 2,636.92 crore) in July-March period of the current fiscal which is much lower than the government fixed target this year, said the officials.