Savings Tools

Half-yr sales exceed yearly target

Hasibul Aman

5 February, 2021 12:00 AM printer

Various attempts of the government failed to restrain the blistering sales of savings certificates as the half-yearly sales of savings instruments already exceeded the yearly target by a large margin.

Savings certificates’ net sales rose to as high as Tk 204.87 billion during July-December period, which is Tk 4.87 billion higher than the Tk 200 billion sales target set for the whole fiscal year, suggest latest official data.

Net sales of government savings instruments were Tk 54.33 billion during the same period of 2019-20 fiscal year.

Comparatively higher interest rate, huge remittance inflow and gradual adaptation to the new buying process are the main reasons behind the high growth in the sales this year. 

DNS introduced an online database system in 2019 that had an impact on the overall sale of savings certificates in FY '20

Department of National Savings (DNS) introduced an online database system from July 2019 which had an impact on the overall sales in FY '20 even though the total sales were Tk 671.28 billion against Tk 270 billion target. 

Obtaining of Taxpayer’s Identification Number (TIN) was also made mandatory for the investment in the savings tools.

 “At present, all types of interest rates have fallen including those on bank deposits. So, people are taking more interest in safe investing in savings certificates,” said Dr Ahsan H Monsur, Policy Research Institute (PRI) executive director.

The interest rate on bank deposits was 8 to 10 per cent earlier which has now come down to only 5 per cent. But interest rates on savings certificate are still 10 to 12 per cent, the noted economist explained.

“If there were no purchase ceiling, monthly sales would have reached Tk 200 billion,” he believes. 

Higher remittance inflow in the current fiscal year has played the key role in shooting up savings certificate sales, according to Dr Monsur.

Inward remittances witnessed 37.6 per cent year-on-year growth to nearly $13 billion in the first six months of FY21 supported by cash incentive. In 2019-20, July-December’s remittance inflow was below $9.5 billion.

DNS officials say investors were not familiar with the new buying process and many of them had no TIN, which is mandatory for the online system.

But the savers are gradually becoming used to the new process like providing national identity (NID) number, income-tax certificate and depositing money through bank cheques, they added. .

The government had put in place the new buying method in consideration of controlling high savings certificates sales that enhance public debt burden as it has to pay higher interests on them compared to bank borrowing.

As part of the efforts, the government increased tax at source on income from the savings tools to 10 per cent from 5 per cent earlier alongside introducing the online system, NID numbers and TINs.

Opening a bank account has also been made mandatory while purchasing any type of savings certificate as the interest now directly go to the bank account.

Four types of savings certificates are now on sale with up to 11.76 per cent interest rate. DNS also sells different types of bonds to local and expatriate Bangladeshis. Some 20 million investors have an investment in the instruments.