Net sales of National Savings Certificates (NSCs) have soared in terms of both target and last year’s performance and stood at Tk25700 crore in the first seven months (July – January) of current FY 2020-21.
The current fiscal year’s net sales of NSCs during the period July-January surged by 235.07 per cent compared to Tk7,670 crore in the corresponding period of FY 2019-20.
Net savings certificate sales were worth Tk5,210 crore in January 2021 which is three times more than that in December 2020 and double the amount in January 2020.
Surprisingly, investors’ interests in savings tools have been rising continuously even though the investment limit on savings certificates was lowered, an electronic system was introduced and also the Taxpayer’s Identification Number (TIN) was made mandatory.
On the other hand, the government target of receipts from sales of NSCs was Tk20,000 crore to meet the budget deficit for the current fiscal year and the amount received surpassed the target by 28.5 per cent in these seven months.
At present, the average interest rate on bank deposits is below 5 per cent, while the average interest rate on savings certificates is up to 11.3 per cent. Investors are turning to savings certificates as interest rates on bank deposits fell and it leads to a sales surge against the government target.
To mention, one can buy Tk30 lakh-worth of the certificates and double that using joint accounts.
Ahsan H Mansur, executive director of Policy Research Institute (PRI), said, “At present, investors are naturally leaning towards savings certificates as the gap between interest rates on bank deposits and savings certificates is increasing.” “In this case, no one has anything to do,” he added.
“The interest rate should be reduced to keep pace with everything. Otherwise, at the end of the fiscal year, the government will have to bear a massive amount of interest on savings certificates.”, he further explained.
Otherwise, the government will fall into trouble, he said, adding that the revenue is not increasing so much that there will be no problem in paying this interest. Instead, in the situation of revenue income, other expenses have to be reduced and interest has to be paid.
Earlier, with a view to implementing the single-digit interest rate on lending, the government had fixed a 6 per cent interest rate on deposits from February 2020. Then the pandemic caused the plans to be changed. Later, Bangladesh Bank rolled out a vastly expansionary monetary policy for fiscal 2020-21 in July last year.