NSCs net in Tk 3,498cr more in July

savings

People continued to invest heavily in national savings certificates and bonds in the first month of the new fiscal year with net investment rising by 77.01 per cent in July compared with the figures of the same month of the last fiscal year because of low bank rates.
According to latest Directorate of National Savings data, the net investment in the savings instruments increased to Tk 3,498.37 crore in July of FY17 compared with that of Tk 1,976.28 crore in the same month of FY16.
The net investment in the national savings tools hit a fresh record at Tk 33,688.60 crore in FY16 against the government target of Tk 15,000 crore as rate of interest on the tools is almost double the rate of banks’ fixed deposit schemes.
In its fiscal budget for FY17, the government set a borrowing target of Tk 19,610 crore from the NSCs.
A DNS official told New Age on Tuesday that the government’s borrowing target from the NSCs would cross the annual target within the first half of FY17 if the existing investment trend continued.
The savings instruments worth Tk 4,932.37 crore were sold through banks, national savings bureaus and post offices in July FY17 whereas the sales of the NSCs were worth Tk 3,236.40 crore in the same month a fiscal year ago.
The net investment in the NSCs stood at Tk 3,595.83 crore in June, Tk 3,605.06 crore in May, Tk 3,299.46 crore in April, Tk 3,297.71 crore in March, Tk 3,287.57 crore in February, Tk 3,297.38 crore in January this year and Tk 1,979.73 crore in December last year.
The government cut the rate of interest by around 2 per cent on its different savings tools on May 23, 2015 to contain the upward investment trend, the official said.
Despite the rate cut by the government, the clients’ rush for the tools continued as the interest rate for the savings certificates and bonds was still much higher than that of the banks’ deposit products, he said.
The government faced pressure in paying interest to the clients who invested in the NSCs in recent years as the interest rate for the savings tools is between 11.04 per cent and 12 per cent, he said.
Banks are now offering interest rates ranging from 6 per cent to 7 per cent to their clients for the fixed deposit schemes.
Banks are still continuing to cut the rates of interest on their deposit products as they have been facing excess liquidity for several months due to lower credit demand from the industrial sector amid political uncertainty and delicate situation in law and order, the official said.
Due to the higher net investment in the national savings certificates and bonds, the government’s borrowing from the banking source decreased significantly in FY16.
The government’s net borrowing from the banking sector stood at only Tk 4,807.50 crore in FY16 against the annual borrowing target of Tk 38,523 crore.
The government’s net bank borrowing was a negative of Tk 6,869.61 crore in FY15 as it repaid significant amount of money to the scheduled banks and the BB against its previous loans.
Against the backdrop, the government has formed a nine-member permanent committee in August to review and re-fix the interest rates on savings instruments twice in a year to tighten the galloping borrowing from the costly instruments.
The finance ministry will announce new rates for savings tools in January and October of each year, the official said.

Source: New Age