The monthly net investment in the national savings certificates and bonds hit its all-time high at Tk 4,297.20 crore in August thanks to low bank rates for deposit products.
The net investment increased by 62.10 per cent in August compared with that of Tk 2,650.91 crore in the same month a year ago, according to the latest data of Directorate of National Savings. The previous highest was at Tk 3,605.06 crore in May this year.
A DNS official told New Age on Sunday that despite the rate cut by the government for the savings tools on May 23 last year, 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.
The government borrowing from the NSCs would cross the annual target within the first half of FY 2016-17 if the existing investment trend continues, he said.
In the budget for FY17, the government set an annual borrowing target of Tk 19,610 crore from the NSCs.
The DNS data showed that before August, the monthly highest net investment in the NSCs was Tk 3,605.06 crore in May this year.
The data showed that the net investment in the savings instruments also increased to Tk 7,795.57 crore in the July-August period of FY17 compared with that of Tk 4,627.19 crore in the same period 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 the rate of interest on the tools is almost double than the rate of interest on banks’ fixed deposit schemes.
On May 23, 2015, the government cut the rate of interest by around 2 per cent on its different savings tools to contain the upward investment trend, the DNS official said.
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.
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 in recent years due to lower credit demand from the industrial sector amid dull business, the official said.
Due to the higher net investment in the national savings certificates and bonds, the government borrowing from the banking source decreased significantly in FY16.
In July-August of FY17, savings instruments worth Tk 11,259.66 crore were sold through banks, national savings bureaus and post offices whereas the NSCs worth Tk 7,760.83 crore were sold during the same period a fiscal year ago.
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 Tk 6,869.61 crore in FY15 as it had 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 reset the interest rates on savings instruments twice 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.
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