Stricter regulations act behind the fall, say experts
The net sales of national savings certificates (NSC) fell by around 73% in the first eight months of the current fiscal year– July to February– thanks to the strict regulations of the government to lessen investment in high interest-bearing savings tools.
Net sales of savings tools fell by 72.85% or Tk25,936.61 crore year-on-year to Tk9,665.88crore during the period (July-February) from Tk35,602.49 crore in the same period of the last fiscal year, according to the latest data Bangladesh Bank (BB) latest data.
However, sales of NSCs rose by 42.65% to Tk1,992.52 crore in February this year, compared to the same month of the previous fiscal year, as revealed in the data.
The sales of saving tools dropped drastically owing to the tightened rules and regulations relating to investment in saving certificates, according to experts.
Increase in tax on interest income from investment on savings tools was also a reason for the fall in its sales in this period, they added.
The government in the budget for the current fiscal year imposed a 5% tax at source on interest income from NSCs worth up to Tk5 lakh. It also levied 10% tax at source for investment in schemes above Tk5 lakh
According to new rules imposed by the government, those investing in the purchase of savings tools should submit their electronic taxpayer identification numbers (e-TIN) and national identity cards (NID). If the amount is more than Tk1 lakh, they must pay the money through bank cheques.
To meet a portion of the budget deficit for the current fiscal year, the borrowing target from savings certificates was set at Tk27,000 crore. However, the target was reduced drastically in the revised budget owing to a falling trend in NSC sales.
Talking to Dhaka Tribune, Agrani Bank Chairman Dr Zaid Bakht said the falling trend in NSC sales was not a very bad indication, as the government was getting money from the banking system at cheaper rates than saving certificates.
Lower dependence on saving tools would provide relief to the government from its soaring debt burden to some extent, he added.
The highest interest rate for savings instruments is near 12% when the government can borrow funds at 8 to 9% from banks.
From July to May this year, the government borrowed Tk64,296.36 crore from the banking system, while the government's bank borrowing target was Tk47,364 crore for FY20, as per central bank data.
In the upcoming budget for FY21, borrowing from savings certificates is likely to be proposed at Tk24,000 crore.
However, experts doubt whether it will be achievable amid the coronavirus pandemic.
Currently, the Department of National Savings is offering four types of savings schemes — 5-year Bangladesh Sanchayapatra, 3-month Profit Bearing Sanchayapatra, Family Savings Certificate and Pensioner Sanchayapatra.