Savings certificate sales rose one and a half times over the yearly target in the first nine months of the current fiscal year even after the government’s move to rein in the sales spiral.
Sales of the savings instruments hit Tk 39,733 crore during July-March period of the current fiscal year, according to data of the Department of National Savings.This was 152 percent higher than the government's yearly borrowing target from saving certificates of Tk 26,197 crore.
This higher sales trend is widely criticised for the government’s domestic debt burden as well as failure to cut bank loan interest rates to single digit as interests paid on these instruments are higher than bank deposits.
With the high sales, the initiatives to ensure greater oversight on the sales, including automated sales, and make it mandatory for savers to provide TIN and national ID numbers apparently seem to be futile.
In March, monthly net sales stood at Tk 4,130 crore, Tk 541 crore up from Tk 3,589 crore sales in March one year ago.
Lacklustre business trend, eroding confidence in capital market and comparatively higher interest rates are the major reasons for which the rich and lower- and middle-income people are equally rushing for these saving schemes, financial market analysts say. Usually, interest rates on fixed deposits in commercial banks range from 6 percent to 9 percent whereas that on saving certificates range from 11.04 percent to 11.52 percent.
Meanwhile, the government’s total loan from its saving certificates until March this year stood at Tk 2,77,499 croreThe government has to pay interests on saving certificates on specific time intervals and at the same time it has to refund the principal amount to the buyers after maturity.
While calculating net monthly investment on the instruments, the interests and principal amount of previously sold certificates are deducted.
The government utilises the money collected from the sales in meeting financing deficit of development budget, a trend that economists do not support, suggesting looking for cheaper sources for the budget deficit financing.
Economic analysts think that the high sales trends can destabilise the equilibrium in money market. They have called for ‘rationalising’ interest rates on saving certificates.
In early May 2015, the government had cut interest rates by 2 percent on average from over 13 percent, which has little impact of the ever increasing sales.
Finance Minister AHM Mustafa Kamal has recently said they have not yet decided to cut the interest rates considering its social security aspects but they plan to control its sale so that wealthy people cannot buy it.