NSC’s negative growth due to low interest rate

Staff Reporter :
As people under significant inflationary pressure due to rising commodity prices and national savings certificates (NSCs) are offering relatively low interest rate, the net growth of sales of national savings certificates (NSCs) again experienced a downward trend in February this year.
According to recent data from Bangladesh Bank (BB), the net sales of NSCs were Tk 440 crore negative in this February.A total of Tk 7,105 crore NSCs were sold in the February month whereas the government paid back Tk 7,545 crore for principal and interest for in that month, the data said.
Besides, from July to February of the financial year 2022-23, the net sales of national savings certificates were Tk 3,509.5 crore negative as if the government chose repayment instead of borrowing any money through the tools in the period.
In first eight months of the current financial year (July-February), total sales of NSCs were Tk 55, 862 crore. On the other hand, Tk 59,372 crore has been withdrawn by the customer after selling the savings bonds, data revealed by the central bank.
Investment analysts said that the sale of savings bonds has collapsed due to the imposition of different restrictions. Investment limits have been imposed. So many people are not able to make re-investments at the end of the term maturity.
Apart from this, due to high inflation, common people are not getting much profit. The mandatory inclusion of national identification documents during the purchase of savings certificates have also contributed to such a steep decline.
The government might want to avoid high interest burden considering the current economic crisis in the country, they added.
However, in last six months only in January it witnessed a positive trend of net selling of NSCs at Tk 37.43 crore. The net sales of saving certificates were Tk 1,490 crore negative in December, Tk 983.32 crore negative in November, Tk 96.31 crore negative in October, Tk 70.63 crore negative in September as per BB data.
Meanwhile, to adjust the FY23 budget deficit,  
the government has set a target to mobilise Tk 35,000 crore through sales of NSCs in the financial year 2022-2023.
The government now prefers borrowing from banks to cut interest cost, as interests on saving tools are higher than the interest on bank loans. In July-December 2022, the government borrowed around Tk 45,057 crore from the central bank.
In previous fiscal year of 2021-2022, the total government borrowing through the savings certificates amounted to Tk 1.08 lakh crore and had spent Tk 40,002 crore to pay off interest.