Once upon a time, but still in living memory, defence savings certificates used to fetch at the end of five-year term Tk. 210 for every Tk. 1,000. The banks also issued many savings schemes which had earned at least double of the amount deposited at the end of 5-year term.
Even very recently, many of the banks offered at least Tk 1,000 net after payment of income tax every month for Tk. 1,00,000 of FDR (Fixed Deposit Receipt) to be more competitive. The non-banking financial institutions (NBFIs) used to offer more than that. These are now stories of the past.
In those days of scarce resources, some banks had introduced time-bound Deposit Pension Scheme (DPS) yielding high profits. Those are also now stories of bygone days. Even maximum of Tk.10,00,000 allowed for the retirees could never reap the benefit of the relief of income tax on this income. The initial circular from the National Board of Revenue (NBR), however, waived this income tax. Banks now have reduced the rates on savings instruments. The NBFIs have followed the banks and reduced their rates. The government has also reduced the rates on its various saving instruments.
Against the backdrop of reduction of deposit rate on savings, it is now almost a nightmare, especially for retirees from the government-owned banks and other offices, to find where to go to maintain a reasonable living with the meagre savings and small retirement benefits.
This writer had a habit of strolling around the 'bank para' in Dilkhusa during lunch recess and used to frequently meet on the streets some of his old colleagues who retired from the government-owned banks. They were known throughout their career for their sincerity and honesty. Through these meetings, it could be learnt that they were making a reasonable income by investing in the share market. Those are also old stories. These persons no more venture to go near the share market.
The charm of share market vanished when their hard-earned money invested in the market went down the drain in 2010. The fall was accelerated by some unpalatable remarks like 'share market are casinos', 'I do not know much about it' and 'We have no business to intervene in the market'. Even some ones ventured suggesting to the extent of closing down the share market for three or more years.
Those persons who said so are very respectable in the country. It is a common knowledge in Bangladesh that irresponsible remarks, coming from the supposedly responsible persons, have damaged many institutional frameworks in the country.
To salvage the market, some one suggested when we can outsource the Managing Director of Biman, we can do the same in the case of stock market? Stock market, which is one of the cheapest sources of fund mobilisation throughout the world, is, unfortunately , a nightmare in Bangladesh.
We also remember that the then Finance Minister of India congratulated all concerned when the share index of the Bombay stock market crossed 10,000. The other day, it crossed even 20,000 mark. Alas, everybody in Bangladesh, who is given the task of delivering goods for the interest of the market, gets scared when it starts becoming bullish, because, it appears, they are only interested in protecting their jobs, not the market.
Business circles always cry for reduction of lending rates. We have not clearly understood or reasonably analysed the prevalent corporate rates across different sectors of the economy. The moneyed people have strong lobbies almost everywhere across the globe. The pressure always is on the high side.
Unfortunately, there are some banks which thrived on 6.0-7.0 per cent profit margin; in our case, we tend to feel, it should not be more than 4.0 per cent. Even that could be less for the prime clients who do not thrive on rescheduling, interest waiver, blocking of loans from repayment for so many years, etc. The incentives so allowed to the big defaulting clients are great disincentives for the good clients.
The banks even could reduce their lending rates, keeping the high rates of deposits making a spread of 4.0 per cent. The Bangladesh Bank and the government allowed the banks to achieve higher margins perhaps for the government's interest of having more funds from banks on higher volume of profits.
The concept of base rate once introduced by the Bangladesh Bank could not establish its foothold yet. If it could be administered rigidly, the banks could fix their spread between 2.0-4.0 per cent keeping an eye on small savers like retirees from the government-owned banks.
When bank deposit holders and small-scale share market operators found the doors shut, they looked for monthly cashable government-owned Sanchayapatra as they found the rates available reasonable for them. On announcement on reduction of rates of return on these instruments, now that door too has been shut.
We were taken aback when a statement came from a very responsible quarter justifying the reduction, saying that high of return rates allowed on the Sanchayapatra helped rich people reap the benefit most from such instruments. We are not aware of his definition of 'rich persons'. It is everybody's knowledge that all Sanchayapatras, including those, among others, family savings certificates, have an aggregate ceiling of Tk. 10.5 million for an individual. We fail to understand how one could really become 'rich' with such an amount in these difficult days.
Now the onus is on the government to find a suitable way to redress the plight of at least the retirees from government service from the onslaught of reduction of rates on all fronts.
The writer is a former managing director of several banks and financial institutions. [email protected]
© 2024 - All Rights with The Financial Express
