Business Report :
Net sales of savings certificates saw a drastic fall year-on-year decline of more than 309 per cent in the first 10 months (July-April) of FY24 compared to the same period of FY23, mainly owing to persistently high inflation, and steep bank interest rates.
Data from Bangladesh Bank indicates that from July to April of FY24, net sale of savings certificates increased negatively by Tk14,648 crore.
On the other hand, sales of savings certificates was negative Tk3,579 crore during the same period of FY23.
Among the first 10 months of FY24, in the last eight months, encashment rates were higher than the volume of fresh purchases.
The net sale of savings certificates is what remains after paying the interest and principal on the savings certificate sold previously.
Declining investment in savings certificates is often considered good for the government, because in economic terms, the net sale of savings certificates is considered a loan or government’s internal borrowing.
The proceeds of the sale are put in the government treasury and utilized to fund state development.
In exchange, investors in savings certificates must pay earnings every month.
As a result, the Ministry of Finance sets a target for government borrowing from this domestic borrowing source in the budget each year.
Nonetheless, April 2024 witnessed a further decline in net sales in contrast to April 2023, indicating a declining level of public saving behaviour in these government borrowing instruments.
According to data from the National Savings Directorate, the net sale of savings certificates last April was negative at Tk2,103 crore.
In March, the net sales were even more dire at around Tk3,653 crore.
However, net sales in April last year were positive at around Tk582 crore.
The data shows that the net sales of savings certificates in the first two months (July-August) of the last FY24 were positive at Tk5,562 crore.
Since then, net sales have been in the negative, with Tk147 crore negative in September, Tk1,040 crore in October, Tk1,554 crore in November, Tk2,204 crore in December, Tk1,287 crore in January, Tk1,541 crore in February, Tk3,653 crore in March, and Tk2,103 crore in April.
Why the drop
According to market insiders, due to various restrictions on investment in savings certificates, customers have reduced investment in savings certificates.
Apart from this, the saving power of people has decreased because of high inflation.
Inflation has been above 9 per cent for the past 15 months.
Owing to this inflationary pressure, a section of savings certificate investors are forced to use their savings.
Apart from this, the upper limit of purchase in the name of a single person has also been reduced.
Experts have also said that the interest rate on bank deposits has increased, which may affect savings certificates.
Many banks are also offering attractive interest on deposits.
Liquidity-strapped banks in particular are offering up to 12 per cent interest on deposits, which is higher than savings certificates.
Currently, the interest rate on pensioner’s savings certificates is 11.76 per cent.
Apart from this, the interest rate on family savings certificates is 11.52 per cent, the interest rate on five-year Bangladesh savings certificates is 11.28 per cent and the interest rate on three-month profit earning savings certificates is 11.04 per cent for three months.
However, if it is broken before maturity, this interest is not met.
Besides, once upon a time wealthy people used to buy savings certificates anonymously for large sums of money.
Money from corruption was also invested here. But that has reduced as savings card management has gone digital, boosting transparency.