The net investment in the National Savings Certificates (NSCs) and bonds hit a new record at Tk 11,707.31 crore in the recently concluded financial year as clients invested heavily in the savings tools due to lower rate of interest of deposit products of the scheduled banks, as per report of a local daily.
An official of the Directorate of National Savings (DNS) said on Tuesday that the net investment in the government savings tools had made the fresh record in the financial year 2013-14 as the premature cashing of the tools declined significantly in the period. The previous highest net investment in the savings tools was Tk 11,590.64 crore posted in the FY10. According to the DNS data, the net investment in the savings instruments increased by 1,414.84 per cent in the FY14 from Tk 772.84 crore in the FY13.
The DNS official said that the premature cashing by clients declined in the last financial year as the five-year savings tools, which were sold hugely in the FY10, would mature this financial year. He said that previously clients had made huge premature cashing of their savings tools, but the trend (premature cashing) changed significantly in the FY14. The DNS data showed that sales of the National Savings Certificates and bonds increased by 4.21 per cent in the FY14 compared to that of the FY13. The savings instruments worth Tk 24,309.60 crore were sold through banks, national savings bureaus and post offices in the FY14 whereas the total sales of the NSCs in the FY13 were Tk 23,326.77 crore in worth.
The main reason for this is the fact that the tools are offering significantly higher interest rates than the banks, most of which are offering rates for 3-12 month deposits of 7-9 per cent. The reason why banks are offering such low rates is of course the sluggish nature of investment in our economy – businesses are afraid to take new loans due to the ongoing political uncertainty as excess liquidity in the sector reached Tk 120,000 crore as of March, 2014.
The lowering of interest rates should have been a good thing for investment but despite the downward trend in interest rates – from over 15 per cent a year ago to 12-13 percent today all types of private sector investment is still not picking up. Ultimately the higher interest rates paid by the government will have to be paid for by the tax payer in the form of higher taxes and other payments and this will put pressure on the existing businesses to pay higher taxes and on consumers who will have to pay for this through personal taxes and VAT. It would have been far better for the government to resolve the matter politically and then let the economy take its own course.
