Investment in govt savings tools rises by 197pc in July

August 30, 2014

Govt worried over economic impact
The net investment in the national savings certificates and bonds increased by 197.26 per cent in the first month of the financial year 2014-15 compared with that of July of the FY14 as clients invested heavily in the savings tools due to lower rate of interest of deposit products of the scheduled banks. According to the latest Directorate of National Savings data, the net investment in the savings instruments increased to Tk 1,857.69 crore in July of the FY15 from Tk 624.93 crore in the corresponding month a financial year ago.
Bangladesh Bank officials said that the higher investment trend in the savings tools made the government worried as the net investment would surpass to a great extend the government-set target at the end of this financial year if the present trend continues.
The savings instruments worth Tk 2,727.43 crore were sold through banks, national savings bureaus and post offices in July of the FY15 whereas the sales of the NSCs in the same month of the FY14 were Tk 2,144.30 crore in worth.
The net investment in the national savings certificates and bonds had hit a new record at Tk 11,707.31 crore in the FY14.
The previous highest of the net investment in the saving tools was Tk 11,590.64 crore posted in the FY10.
The DNS data showed that 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.
Against the backdrop, the government is now thinking how to tackle the higher investment in the national savings certificates and bonds as such type of situation will increase the government liabilities, a BB official told New Age on Thursday.
The government set a net investment target of Tk 9,056 crore for the FY15.
The government’s Cash and Debt Management Technical Committee held a meeting on August 26 at the central bank headquarters in the capital where senior officials of finance ministry and the BB discussed the latest situation in the investment trend in the government savings tools, the central bank official said.
Finance ministry deputy secretary Sohelur Rahman Chowdhury presided over the meeting.
At the meeting, the officials said that they would have to find alternative way to tackle the higher investment in the government savings tools if the clients continue to make large investment in the tools.
They said that the government would be forced to decrease the rate of interest on the national savings certificates and bond if the higher investment continues in the months to come.
The government has not much demand to take loan from its savings tools right now as its development work is now maintaining a slower pace, they said.
A DNS official said that previously clients had made huge premature cashing of their savings tools, but the trend (premature cashing) changed significantly in the FY14.
The scheduled banks have recently cut the interest rate of their savings products due to increasing excess liquidity amid sluggish business in the country, he said.
The businesspeople are yet to start their business expansion by receiving loans from the banks due to political uncertainty, the official said.
He said banks were now reluctant to take deposit from the clients, so they cut the interest rate on their deposit products.
Banks are now giving maximum 8 per cent to 9 per cent rate of interest to the clients for the fixed deposit schemes while the interest rate on the government savings tools is between 12.59 per cent and 13.45 per cent.
In this situation, clients continue to make investment heavily in the savings certificates and bonds in the last and the ongoing financial years, the DNS official said.

-With New Age input

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