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Profit rates on savings instruments to be cut by up to 2%

  • Published at 11:50 am June 14th, 2017
Profit rates on savings instruments to be cut by up to 2%
The profit rate on savings instruments may be reduced by as much as 2% from next month after the government decided to adjust the rate to ease its loan burden. “Unusual increase” in savings certificates prompted the move, according to a Finance Ministry summary. The profit rates were reduced in May 2015 for all types of savings accounts by 1% and 1.50%. The budget of outgoing 2016-17 fiscal year targeted earning Tk19,610 crore from savings certificates sales. But earning from the sales in the first nine months was Tk53,770 crore – 40.57% more than the same period of the previous fiscal, sources say. During the July-March period, the government took net loan of Tk37,648 crore from savings certificates. In the last fiscal year, government's net debt from the sector was Tk23,188 crore. The revised budget for the current fiscal has been increased by more than doubling the target of borrowing from the sector to Tk45,000 crore. In its proposed budget, the government plans to borrow Tk30,150 crore. The Finance Division has said that if the trend of selling of savings certificates continues, the loan can become more than twice the amount at the end of the fiscal year. This will force the government to pay extra money in bank interests and this in turn, will put extra pressure on government budget in the short and medium terms. On the other hand, the government's surplus balance is increasing steadily. In this situation it is very important to make decisions about reviewing the profit rates of savings projects. Finance Minister AMA Muhith recently said the profit rate of savings certificates in Bangladesh was “higher”. “Generally, profit rates of savings certificates are 1-2% higher than the bank interest rates,” he said. “At present, this gap is more than 4%. If this continues, investment in this sector will increase further.” “The burden of the future government debt will increase and that is why we are going to decide to review it,” Muhith added. Currently, the interest rates on deposits in banks are between 4% and 6%. On the other hand, profit rates of savings projects is between 11% and 12%.