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Sales of savings certificates drop further

25 March 2023

Staff Reporter :
The sales of national savings certificates (NSC) are declining abnormally, which are forcing the government to borrow from the banking system.
As per the data of the Department of National Savings service, the sales of savings certificates have decreased by Tk 3,069.43 crore in the first seven months (July-January) of the current fiscal year (2022-23).
The net sales of the NSCs were Tk12,175.66 crore in the corresponding period of last fiscal year (2021-22).
Abdur Rahim, a retired government official, said, "Savings certificates were considered as a safe investment area for common people. But, the people are now not showing interest in investing here due to various restrictions imposed by the government".
Besides, lower in interest rate is also a major reason behind the decline in sale, he added.
The government has a target for collecting a total of Tk 35,000 crore by selling the savings tool in the current fiscal year. But the sales stood at Tk 9,106.23 crore in the first seven months of the current fiscal year. Of the amount, the savings tools sold worth Tk37.43 crore in January this year.
Recently, the International Monetary Fund (IMF) recommended that the interest rate on savings certificates should be close to the market rate - the figures maintained by the banks.
Following this, the government is considering going with the recommendation of IMF and slashing the interest rate on savings certificates further and it has been applying some direct and indirect methods to reduce the sales of the savings bonds. Following the drop in NSC
 sales, the borrowing from the banking sector rose to Tk 34,590 crore in the first seven months of FY23.
According to the Bangladesh Bank data, the government loans from commercial banks were Tk 2.02 lakh crore at the end of January last, which was Tk1.81 lakh crore in December, meaning that the government borrowed some Tk 21,000 crore, from the sector in a month.
The target of internal borrowing for the current fiscal was set at Tk 1,46,300 crore, where the banking system is supposed to provide Tk 1,06,334 crore, according to the central bank sources.
There are opinions in favour and disfavour of the high interest on savings certificates. The average interest for four types of the savings tool was more than 11 per cent, but the government lowered the interest rate and also introduced several tiers through a gazette notification in September last year. Its sales have been declining since then, said individuals concerned.
One of the reasons for the decline is the mandatory filing of income tax return for the purchase of savings bonds worth above Tk 500,000.
The Bangladesh Bank (BB) said in a gazette notification in July that the commercial banks should take necessary measures to properly comply with the section-48 of the Finance Act, 2022 in the case of investment of more than Tk 500,000 in savings certificates and post office savings schemes.
Salim Raihan, Executive Director of South Asian Network on Economic Modeling (SANEM), said that it is a matter of concern as many are cashing their savings certificates.
However, a positive aspect from the point of view government of the government is that the less sales of savings certificates would slash the spending on interest, he added.

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