The government is going to review the yield rates of different national savings instruments aiming to keep the sale volume normal, officials said.
The trend of the country's capital market is positive now. The trend of investment on the savings tools may decline if that of the share market continues in future, they said.
"We are observing the overall situation. So, it will take us some time to reduce or review the rate of interest on the different state-owned savings tools. But a review policy would be formulated about the yield rates of savings instruments," a high official at the Ministry of Finance (MoF) said.
"The decision of review on rates of interest of savings tools has been taken to contain the sale volume and the government expenses," a Department of National Savings (DNS) official told the FE.
Information on the outstanding of the government's borrowing through savings tools, auto-reinvestment, personal and intuitional borrowing and volume of the government's borrowing through savings instruments during the current fiscal year (FY) will have to be submitted to the finance division of the Ministry of Finance (MoF) before taking review decision in this connection, sources concerned said.
The government's net borrowing of savings certificates and investment bonds stood at Tk 68.21 billion during the July-September period of the FY 2014-15. It was 75 per cent of the current FY target. The MoF has fixed Tk 90.56 billion net borrowing target from the tools for the fiscal, a high official at the MoF said.
He, however, said it will create a massive pressure on government interest expenditure budget if the trend continues for rest of the nine months of the FY.
Encashment is not taking place up to the expectation level due to auto-reinvestment facility of some savings instruments. As a result, the investment of the sector is also increasing. In this context, it is necessary to form a review policy on rates of interest of the government savings instruments, an official concerned of the MoF said.
The net sales of savings certificates stood at Tk 90.77 billion in the four months of FY 2014-15, according to the DNS data.
The reduction of rates of interest on deposit schemes by different banks led to rise in overall investment in the government's savings instruments, a high official of a private bank said.
Presently, a large number of scheduled commercial banks are offering only about 8.0 to 9.0 per cent rate of interest on their fixed deposit schemes. But the DNS is offering 12 to 13.45 per cent yield rates on tenure of 3 to 5 years savings tools and also investment on government savings tools is also safe which is encouraging people to divest funds to government savings tools, they said.
The government's net borrowing of savings certificates and investment bonds increased excessively recently. As a result, government expenditure is increasing gradually. So, it is urgent to take a decision for reviewing the yield rates of different savings instruments, a source attending the last meeting of the cash and debt management committee (CDMC) said.
The investment volume on savings tools declined to Tk 2.71 billion in FY 2011-2012. Considering the downtrend of the investment the government took the decision to increase the rates of interest on the tolls. It takes over 3 years time to gearing up sales of the savings tools, a DNS high official said.
Total deposit with the banks excluding inter-bank ones came down to Tk 6,733.58 billion as of October 2 from Tk 6,760.24 billion of September 18 last. It was Tk 6,721.50 billion as on August 28, 2014.
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