The government has backtracked from its plan to slash interest rates of National Savings Certificates (NSC) fearing a possible public backlash over the decision ahead of an election year.
“The plan has already created a great furore. Even the ministers and lawmakers have showed their resentment over the matter. These have led the government to throw out the plan,” a senior finance ministry official told The New Nation on Wednesday.
He said a lower interest on saving schemes will affect thousands of small investors and retired public servants who have to rely on interest income for maintaining their family expenses.
“The reform will badly affect livelihood of many people and will create an adverse image of the government in an election year. Such a realization has forced the government to abandon its plan of slashing interest rate of savings certificates,” he added.
The official further said that the issue was supposed to discuss in the meeting of the Government’s Cash and Debt Management Committee (CDMC) scheduled to be held on Wednesday. But the meeting was deferred due to unavoidable circumstances.
Finance Minister AMA Muhith on May 21 announced the interest rate cut.
He said that the government would review interest rates on savings schemes to maintain a logical difference between the interest rate on bank deposits and savings certificates.
Four types of savings certificates – Five Years Sanchayapatra, Three Monthly Sanchayapatra, Pensioner Sanchayapatra and Poribar Sanchayapatra – are now in the money market for public subscription.
Currently, interest rates on bank deposits are between 4-6 percent. The interest rate on savings certificates is approximately between 11 and 12 per cent.
“A harsh impact is feared from the measure. If the decision is executed, it will hit thousands of pensioners, small savers and investors, as interest earning from the savings certificates is their main source of income,” former Bangladesh Bank (BB) Governor Dr Salehuddin Ahmed told The New Nation.
When asked, he said, “I don’t think that borrowings from the sales of saving certificates were costly when the government was paying the interest from taxpayers’ money and it was going to the taxpayers again.”
The government last reviewed the interests on savings certificate on May 10, 2015. At that time it cut savings schemes’ interest by 2.0 per cent.
The government has set a target to borrow Tk 30,150 crore from the savings certificates in the current fiscal.
Sales of saving certificates hit a record high to Tk 75,100 crore in the immediate past fiscal (2016-17) compared with previous fiscal’s Tk 53,700 crore, showing a 40 per cent year-on-year increase.
