The sale of the instrument is set to cross even the revised target of Tk45,000 crore set for the outgoing financial year
Net sale of National Savings Certificates (NSC) is likely to be more than double its original target of Tk26,197 crore this fiscal year ending June 30, as per sources at Internal Resources Division (IRD).
The sale of the instrument is set to cross even the revised target of Tk45,000 crore set for the outgoing financial year , as the government in the first 10 months of the 2019-20 fiscal year already borrowed Tk43,474.42crore from the savings tools.
Officials at the Directorate of National Savings Certificates have said that the mad rush for the lucrative instruments further intensified soon after the proposed 10% tax at source was announced in the draft budget.
“It seems the sale (of savings certificates) will even overshoot the revised target by Tk6,000 crore to Tk7,000 crore, and be more than double the original estimate,” a senior official at the IRD under the finance ministry has told Dhaka Tribune.
He finds borrowing target of Tk27,000 crore set in the revised budget from the savings tools unrealistic as the instruments are becoming increasingly an attractive area to invest.
In July-April of 2017-18 fiscal year, government’s borrowing from the savings certificates stood at Tk40,063.19crore.
“New rules and regulation will be implemented to sell the savings certificates in the next (2019-2020) fiscal year. As a result, public fear resulted in increased investment in the savings certificates ,” Agrani Bank Chairman Dr Zaid Bakht points out.
Zaid, also research director of Bangladesh Institute of Development Studies, says: “High interest rates on national savings tools than banks’ deposit rates is another reason for the high demand for the tools.”
For 2018-2019 fiscal year, the government targeted that Tk26,197crore would be collected from national savings scheme sales. However, the government increased the targets to Tk45,000crore in the revised budget due to its growing demand.
High yields on national savings instruments is encouraging a large number of small investors and pushing up the government's debt burden.
Officials at the Directorate of National Savings Certificates cite the “striking difference” in the interest rates on offer has been encouraging people to move their money from banks to savings certificates.
While banks are typically offering 6-7% interest on deposits, savings schemes offer between 11.04% and 11.76%.
Government moved to introduce National Savings Scheme Online Management System from July this year to check abuses in investments in the government savings tools.
As part of the move, the finance ministry launched the system on February 3 this year on a trial basis and instructed all the entities to install the system by June this year.
There are allegations that many high net worth individuals invest huge amount of money to get high interest, prompting the government to install the system, officials concerned said.
For FY2019-20 fiscal year, the overall budget deficit (excluding grants) is expected to be Tk1,45,000 crore, about 5% of the national GDP, while Tk27,000 crore will come from National Savings Schemes.