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Investment in national saving certificates up 774%

Islamic-Banking1Net investment in national savings certificates increased by 774.38 per cent in the last five months (July to November) of the current fiscal year (FY) 2013-14 compared to the same period of the previous FY 2012 -13. This has been credited to a dull investment situation in the private sector amid political unrest and a lower rate on the banks’ savings products.

According to the latest data from the Directorate of National Savings (DNS), the net investment in the savings instruments from July to November of the current fiscal was Tk 3,369.41 crore while it was Tk 385.35 crore in the same period of the previous FY 2012-13.

Mahfuzur Rahman, executive director of Bangladesh Bank (BB), said the government certificates are offering higher interest rates compared to private financial institutions, for which the sale of government certificates increased over the couple of months.
Md Nurul Islam, a deputy director of Bangladesh Bank (BB), said currently banks are offering interest rates on term deposits ranging between 10 and 12.5 per cent.

On the other hand, the rate of interest is 13.19 per cent on five-year Bangladesh savings instruments, 12.59 per cent on three-monthly profit-bearing savings certificates, 13.19 per cent on pensioners’ savings instruments and 13.45 per cent on family savings certificates, he said.

Under the circumstances, the net investment in the savings instruments jumped in the first five months of FY14. Investors want security and higher profits against their investment, Nazrul said.

Talking to The Independent, economist M Mamunur Rashid said that investors (especially retired officials and small investors)  are now more interested in investing in savings instruments as the country’s investment sector including the industrial sector is now facing a stagnant situation due to the recent spates of political violence.

The country’s capital market is failing to return higher profits to investors than the government, for which government bonds investment is increasing in recent times, he also said. The majority of savings schemes of the DNS are now offering the clients’ interest rates which are higher than those on the banks’ deposit products, he also said.

Besides, the banking sector is now enjoying enough liquidity as their loan disbursement to the industrial sector declined significantly in the last few months, he added. “This is an irony that investors are choosing to invest in government bonds???, he said.

Disbursement in the industrial sector declined at almost 9 per cent over the last couple of months, and banks’ idle money stood at around 83,000 crore. For these reasons, some banks have cut interest rates on their savings products.

“The increasing trend of national saving certificates and bonds would facilitate the government to meet their budget deficit; simultaneously it will reduce the private sector growth, which is not a good sign for attaining a sustainable economy,??? said Saiful Islam, manager of Pubali Bank, Islamic Banking Branch.

The outstanding amounts of national saving certificates were also increased by 5.56 per cent from July to November of FY 2013-14. The outstanding amount of savings instruments was Tk 67,879.84 crore from July to November, while it was Tk 64,302.69 crore in the previous FY 2012-13.

Saiful Islam Patwary, manager of First Security Islami Bank, Dilkusha branch said that investors are reluctant to withdraw their investment from government bonds considering the current ongoing situation of the country.
“Instead of encashment of the bond after maturity, the general investors are further continuing their investment in national savings bonds???, Patwary said.

Higher investment in national savings bonds might be increased in the near future if the political unrest is not stopped immediately, he also added.

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Source: Daily Independent

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