The net investment in the national savings certificates and bonds in the first 10 months of the current financial year 2015-16 stood at Tk 26,487.72 crore and is set to surpass the revised (upward) annual target of Tk 28,000 crore at the end of the fiscal year due to the clients’ rush for the tools.
Clients continue to invest heavily in the NSCs due to low bank deposit rates and sluggish business situation in recent months, an official of Directorate of National Savings told New Age on Sunday.
In its fiscal budget for the FY16, the government had initially set a borrowing target of Tk 15,000 crore from the NSCs, but it revised the target in early April amid the clients’ rush for the instruments.
The DNS data showed that the net investment in the national savings certificates and bonds increased by 9.77 per cent in the July-April period of FY16 from Tk 24,128.49 crore during the same period of FY15.
The savings instruments worth Tk 43,108.19 crore were sold through banks, national savings bureaus and post offices in the first 10 months of FY16 whereas the sales of the NSCs in the 10 months of FY15 were Tk 35,161.53 crore.
In April this year, the net investment also increased by 12.05 per cent to Tk 3,299.46 crore from that of Tk 2,944.41 crore in the same month a year ago.
The net investment in the NSCs stood at 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 in December last year.
The net investment in the savings tools posted record Tk 28,732.64 crore in last fiscal year as the clients invested a lot in the tools due to lower rate of interest on the banks’ deposit products, the DNS official said.
Against the backdrop of the surge in investment in the NSCs, the government on May 23, 2015 cut the rate of interest by around 2 per cent on its different savings tools to contain the trend, he said.
The government faced pressure to pay interest to the clients who invested in the NSCs in recent years as the interest rate for the savings tools was between 12.59 per cent and 13.45 per cent before the rate cut, he said.
Despite the rate cut, the clients are continuing to invest heavily in the tools as the interest rate for the savings certificates and bonds is still much higher than that of the banks’ deposit products.
The DNS official said that the net investment in the savings tools would make a fresh record in this fiscal year breaking the previous record of the FY15 if the existing trend continues in May and June.
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, 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 the first 10 months of FY16.
The government made no net borrowing from the banking source in the July 1-May 17 period of FY16 but made net repayment of Tk 9,349.87 crore in the period.
Former interim government finance adviser AB Mirza Azizul Islam told New Age last week that the investment in national savings certificates and bonds would increase more in the coming days as the rate of interest on the NSCs was higher than that of the banks’ rate.
The government cut the rate of interest on the NSCs, but the effort failed to curb the upward investment trend, he said.
The government will face budget mismanagement due to the higher interest liabilities, said the economist.
‘Since it is the most expensive borrowing tool for the government considering its rate of interest, the government should stop selling savings tools once its annual target is achieved.’
Source: New Age
