Net sales of national savings certificates dropped by 76.43 per cent or Tk 35,702 crore in the July-May period of the fiscal year 2019-2020 mainly due to tightened rules and taxation.
As per the Bangladesh Bank data, net sales of NSCs dropped to Tk 11,011 crore in the first eleven months of FY20 from Tk 46,713 in the same period of FY19.
The government’s borrowing through NSCs in July-May represents 92.34 per cent of the revised borrowing target of Tk 11,924 crore for FY20.
Savers were reluctant to purchase NSCs as they found the instruments inconvenient despite the fact the investment instruments were offering much higher returns than the bank deposits, officials of the Bangladesh Bank said.
The profit rate for the national savings schemes still stands between 11-12 per cent whereas the interest rate on bank deposits is around 6 per cent.
The government did not get as much funds as it had initially targeted to borrow from the sector in the immediate past fiscal year as many people feared that the automation of the NSC sales procedure might result in scrutiny of their wealth by government agencies in future.
When the NSC sales were manual, it was very difficult for the government entities to track the NSC-holders manually but the launch of online sales of NSCs has made tracking easy.
NSC sales went online from July of FY20, also making ineligible individuals incapable of availing the high-yield investment tools.
Moreover, the increase in taxes on the interest income generated from investment in the savings instruments was another reason behind the plunge in NSC sales in July.
In the Finance Bill-2019, the government raised the tax at source on savings tools by two folds to 10 per cent, irrespective of the investment ceiling, to keep it consistent with the bank interest rate.
Taking the low earning peoples’ dependency on income from NSCs into consideration, the government has slashed the tax at source on the interest income generated from investment in NSCs worth up to Tk 5 lakh to 5 per cent from 10 per cent with effect from August 28.
E-TIN was also a requirement for purchasing NSCs.
Although the bankers had been pressing for reducing the interest rates on NSCs for implementation of the single digit interest rates in the banks, the government kept its position unchanged even in this fiscal year.
The sales of the savings instruments were also depressing as people were reluctant to investment in any form because of the coronavirus outbreak that hit the country’s health sector as well as the economy.
As the government’s revenue collection plunged to Tk 2,15,400 crore in FY20, down by 3.79 per cent, or Tk 8,492 crore from Tk 2,23,892 crore collected in FY19.
Revenue collection also fell Tk 85,100 crore short of the revised target set at Tk 3,00,500 crore for FY20.
According to the statement of the Department of National Savings, the gross sale of the national savings certificates stood at Tk 3,227 crore in May this year.
After paying interests and refunding the principal amounts of Tk 2,796 crore in May, net sales of NSCs stood at Tk 430 crore.
As a result of the dismal revenue collection and fall in NSC sales, the government borrowed a record Tk 85,231 crore from the banking sector to meet the budget deficit.
For FY21, finance minister AHM Mustafa Kamal has proposed a loan target of Tk 25,000 crore from non‑banking sources, including Tk 20,000 crore from savings instruments.
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