The net investment in national savings certificates and bonds skyrocketed to Tk 20,319 crore in just five months of the financial year 2016-17, surpassing its annual target of Tk 19,610 crore, as clients invested heavily in the savings tools due to lack of investment opportunities.
Economists say the huge net investment in the savings certificates and bonds has already created a risky situation for the country’s macroeconomic situation as the government will have to face a budget mismatch due to providing a large amount of rate of interest against its savings tools.
According to the latest Directorate of National Savings data, the net investment in the savings instruments increased by 79.40 per cent to Tk 20,319.53 crore in the July-November period of the FY17 compared with that of Tk 11,325.86 crore during the same period of the FY16.
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 bank products continued to maintain a declining trend in the recent months.
The monthly net investment in the national savings certificates and bonds also hit its all-time high at Tk 4,402.85 crore in November.
The DNS data showed that before November, the monthly highest net investment in the NSCs was Tk 4,297.20 crore in August this year.
Savings instruments worth Tk 28,861.69 crore were sold through banks, national savings bureaus and post offices in the July-November period against Tk 19,289.99 crore in the same period of the FY16.
The net investment in the national savings tools hit a fresh record at Tk 33,688.60 crore in the FY16 against the government’s NSC borrowing 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 rates for the savings tools are 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 a lower credit demand from the industrial sector amid dull business, the official said.
Centre for Policy Dialogue executive director Mustafizur Rahman told New Age on Wednesday that huge investment in the national savings certificates and bonds was now creating a risky situation for the country’s macroeconomic situation.
‘Common people have no option but savings tool to deposit their money as the interest rate of banks’ deposit is now very low. Besides, the capital market has been facing a sluggish situation for long resulting that the people are reluctant to invest there,’ he said.
The private companies are not interested in going to capital market to expand their investment which has created a frustrating situation for the country’s business sector, the economist said.
It is not a good indication for the economy that the government has to face double burden of interest rate due to the higher rate on savings certificates and bonds, Mustafizur said.
Policy Research Institute executive director Ahsan H Mansur told New Age that the government had not decreased the rate of interest on savings certificate and bonds in the interest of vested quarter.
The provident and pension fund of the government employees are now being deposited with the savings tools to enjoy large scale of interest rate, he said.
‘The politicians deposit their money with the government savings tools in the name of their relatives. For this reasons, the government has not decreased the rate of interest on the savings tools,’ Mansur said.
The government should decrease the rate of interest on the tools immediately and set the fresh rate in accordance with the banks’ rate of their fixed deposit schemes, he said.
‘The country’s capital market has already destroyed. The banking sector is now facing scam and scandal one after another. The economy will face more crises in the days to come if the government does not decrease the rate of interest on its savings tools’, Mansur said.
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