Economic Reporter :
The government set the target of Tk 15,000 crore from selling of national saving instruments and bonds for the current fiscal 2015-16. The sale of saving certificates during the first seven months (July to January) stood at Tk 16,603 crore, according to the Directorate of National Savings data released on Thursday,
Experts pointed, the sale of saving bonds exceeded the target just only seven months due to lower deposit rate in commercial banks saving instruments. As a result, investors prefer to invest in government saving instruments for getting higher profit.
The net investment in national savings certificates and bonds surpassed its annual target in just seven months as clients continued to invest heavily in the NSCs due to low bank deposit rates and sluggish business situation, they said.
A senior BB official said that the government offers higher interest for bond for which the purchase of bonds increased in the last few months.
Currently banks are offering interest rates on term deposits ranging between 6 to 7 percent. On the other hand, the rate of interest is 13.19 percent on five-year Bangladesh savings instruments, 12.59 percent on three-monthly profit-bearing savings certificates, 13.19 percent on pensioners’ savings instruments and 13.45 percent on family savings certificates, he said. Under the circumstances, the net investment in the savings instruments jumped in the first seven months.
Talking to the reporter, economist M Mamunur Rashid said, investors want security and higher profits against their investment and government savings instruments are offering higher profits. Simultaneously, country’s capital market is failing to return higher profits to investors than the government saving instrument, for which government bonds investment is increasing and getting more popular in recent times, he also said.
Besides, the banking sector is now enjoying enough liquidity as their loan disbursement in the industrial sector declined significantly in the last few months, he added. “This is an irony that investors are choosing to invest in government bonds”, he said.
Actually, the government sells various savings instruments mainly to finance deficit in the national budget. “The huge rising of sale of national saving certificates and bonds would facilitate the government to meet their budget deficit; simultaneously it will reduce the private sector growth, which is not a good sign for attaining a sustainable economy”, also said the economist.
Commercial bank’s loan disbursement to the industrial sector declined over the last couple of months due to political unrest of the country and for these reasons some banks have cut interest rates on their savings products, said Saiful Islam Patwary, Manager of First Security Islami Bank, Dilkusha Branch and added that investors are reluctant to withdraw their investment from government bonds. “Instead of encashment of the bond after maturity, the general investors are further continuing their investment in national savings bonds”, Saiful Islam also said.
Higher investment in national savings bonds might be increased in the near future if the political unrest is not stopped immediately, he also added.
The government mainly sells the savings instruments through various institutions including National Savings Directorate, Post Offices, Bangladesh Bank and Commercial Banks. “An increased number of customers are buying savings certificates from commercial banks mainly due to higher profits,” said Mesbah Uddin, a senior official of Bangladesh Commerce Bank.
An individual can invest up to Tk 30 lakh in five-year term certificates and three-month profit-bearing certificates. An investment of Tk 1 lakh on three-month profit-bearing savings certificates pays out Tk 3,000 in profit excluding all taxes every three months, Mesbah said. An adult female can purchase up to Tk 45 lakh in savings instruments under Paribar Sanchayapatra, and earn Tk 1,070 as net profit each month for each Tk 1 lakh, Mesbah also said.
Against the backdrop of the surge in investment in the NSCs, the government on May 23, 2015 cut the rate of interest by around 2 per cent on its different savings tools to contain the trend, he said.
The government faced pressure to pay interest to the clients who invested in the NSCs in recent years as the interest rate for the savings tools was between 12.59 per cent and 13.45 per cent before the latest rate cut, he said.
Despite the rate cut, the clients are continuing to invest heavily in the tools as the interest rate for the savings certificates and bonds is still much higher than that of the banks’ deposit products.
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 for several months due to lower credit demand from the industrial sector amid political uncertainty, the official said.
The government set the target of Tk 15,000 crore from selling of national saving instruments and bonds for the current fiscal 2015-16. The sale of saving certificates during the first seven months (July to January) stood at Tk 16,603 crore, according to the Directorate of National Savings data released on Thursday,
Experts pointed, the sale of saving bonds exceeded the target just only seven months due to lower deposit rate in commercial banks saving instruments. As a result, investors prefer to invest in government saving instruments for getting higher profit.
The net investment in national savings certificates and bonds surpassed its annual target in just seven months as clients continued to invest heavily in the NSCs due to low bank deposit rates and sluggish business situation, they said.
A senior BB official said that the government offers higher interest for bond for which the purchase of bonds increased in the last few months.
Currently banks are offering interest rates on term deposits ranging between 6 to 7 percent. On the other hand, the rate of interest is 13.19 percent on five-year Bangladesh savings instruments, 12.59 percent on three-monthly profit-bearing savings certificates, 13.19 percent on pensioners’ savings instruments and 13.45 percent on family savings certificates, he said. Under the circumstances, the net investment in the savings instruments jumped in the first seven months.
Talking to the reporter, economist M Mamunur Rashid said, investors want security and higher profits against their investment and government savings instruments are offering higher profits. Simultaneously, country’s capital market is failing to return higher profits to investors than the government saving instrument, for which government bonds investment is increasing and getting more popular in recent times, he also said.
Besides, the banking sector is now enjoying enough liquidity as their loan disbursement in the industrial sector declined significantly in the last few months, he added. “This is an irony that investors are choosing to invest in government bonds”, he said.
Actually, the government sells various savings instruments mainly to finance deficit in the national budget. “The huge rising of sale of national saving certificates and bonds would facilitate the government to meet their budget deficit; simultaneously it will reduce the private sector growth, which is not a good sign for attaining a sustainable economy”, also said the economist.
Commercial bank’s loan disbursement to the industrial sector declined over the last couple of months due to political unrest of the country and for these reasons some banks have cut interest rates on their savings products, said Saiful Islam Patwary, Manager of First Security Islami Bank, Dilkusha Branch and added that investors are reluctant to withdraw their investment from government bonds. “Instead of encashment of the bond after maturity, the general investors are further continuing their investment in national savings bonds”, Saiful Islam also said.
Higher investment in national savings bonds might be increased in the near future if the political unrest is not stopped immediately, he also added.
The government mainly sells the savings instruments through various institutions including National Savings Directorate, Post Offices, Bangladesh Bank and Commercial Banks. “An increased number of customers are buying savings certificates from commercial banks mainly due to higher profits,” said Mesbah Uddin, a senior official of Bangladesh Commerce Bank.
An individual can invest up to Tk 30 lakh in five-year term certificates and three-month profit-bearing certificates. An investment of Tk 1 lakh on three-month profit-bearing savings certificates pays out Tk 3,000 in profit excluding all taxes every three months, Mesbah said. An adult female can purchase up to Tk 45 lakh in savings instruments under Paribar Sanchayapatra, and earn Tk 1,070 as net profit each month for each Tk 1 lakh, Mesbah also said.
Against the backdrop of the surge in investment in the NSCs, the government on May 23, 2015 cut the rate of interest by around 2 per cent on its different savings tools to contain the trend, he said.
The government faced pressure to pay interest to the clients who invested in the NSCs in recent years as the interest rate for the savings tools was between 12.59 per cent and 13.45 per cent before the latest rate cut, he said.
Despite the rate cut, the clients are continuing to invest heavily in the tools as the interest rate for the savings certificates and bonds is still much higher than that of the banks’ deposit products.
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 for several months due to lower credit demand from the industrial sector amid political uncertainty, the official said.
