The net sales of national savings certificates rose by Tk 27,531.54 crore year-on-year to stand at Tk 41,959.54 crore in the fiscal year 2020-2021 as savers rushed to purchase NSCs amid a sharp decline in deposit rates in banks.

In the FY 2019-20, the net sales of NSCs stood at Tk 14,428 crore.

The net sales of NSCs in FY21 was Tk 21,959.54 crore higher than the government’s initial budgetary projection and Tk 11,657.54 crore higher than the government’s revised budgetary target for the fiscal year.

For FY21, the government’s initial target was to borrow Tk 20,000 crore against NSCs. The target was later revised upward to Tk 30,302 crore.

Officials of the Bangladesh Bank and other commercial banks said that a plunge in the interest rate in banks against savings products was the main reason for the surge in the sales of NSCs which have far better interest rates than bank deposits.

Although there was scope for borrowing funds at a lower interest rate from the banking sector, the government continued borrowing against the NSCs and refrained from lowering the interest rate keeping in mind the needs of pensioners and other fixed income groups, an official of the central bank said.

Deposit rates of several banks have dropped to as low as 2-4 per cent.

A BB data showed that the weighted average interest rate of only 19 banks was above 5 per cent.

On the other hand, NSC-holders are receiving interest rate ranging between 11 per cent and 12 per cent.

The situation in the NSC sales changed dramatically after the imposition of the 9-per cent ceiling on the lending rate for banks on April 1, 2020.

Due to the credit growth plunge in banks and non-bank financial institutions following the Covid outbreak and injection of money by the central bank into the economy in 2020, banks observed a sharp spike in idle money in their hands.

So, many banks lowered their deposit rates, discouraging depositors to keep funds with them, officials said.

To prevent diversion of funds from the banking sector to other non-productive sectors, the government on August 8 instructed banks not to offer interest rate below the inflation rate to individual depositors.

In June 2021, the net sales of NSCs stood at Tk 4,573.56 crore against Tk 3,417 crore in the same month of 2020.

With the net sales in June, the government outstanding borrowing against the sales of NSCs reached Tk 3,44,094 crore.

Amid a poor implementation of the annual development programme and high sales of NSCs, the government’s borrowing from the

banking sector reached only around Tk 18,000 crore against the government’s initial target of Tk 84,980 crore. The target was later revised downward to Tk 79,749 crore.