Investment in savings certificates falling due to low interest rate

Investment in savings certificates declined in the December quarter of the current fiscal year after the government reduced the interest on all types of savings certificates in September last.

The government has paid more principal amount and interest in the month of December compared to the sales  amount.

In December, the buyers of savings certificates withdrew Tk7,898 crore while the investment in the sector was Tk7,362 crore which is Tk436 crore lower, a rare incident in 18 months.

Officials said that the government cut the interest of savings certificate investment amount of Tk15 lakh to Tk30 lakh by 1.0% and 2.0% on the investment amount of Tk30 lakh to Tk45 lakh and more.   

As a result, the investment started falling from the next month, they added.

The investment amount in savings certificates fell to Tk8,722 in October from that of Tk11,349 crore in September. 

In November, the investment slightly increased to Tk8,941 crore which again fell to Tk7,362 crore in December.     

In November, the clients withdrew Tk8,240 crore and the investment was Tk8,941 crore.

In October, the customers withdrew Tk7,956 crore and the investment was Tk8,722 crore.    

According to the central bank data, the total investment amount in savings certificates in the first six months of the FY2021-22 was Tk51,632 crore. 

The government spent Tk42,042 crore in principal and interest at that time which is 81% of the investment.   

In that case, the net debt of the government from savings certificates at that time was Tk9,590 crore, which is 53% lower than the corresponding period of the last fiscal year.

The net debt of the government from the savings certificate during the July-December period of the FY2020-21 was Tk20,487 crore.

The government has a target to borrow Tk32,000 crore net credit from the savings certificate in this FY to meet the budget deficit. The government has already taken 30% of the credit target from savings certificates in the first six months of the current fiscal year.

The total outstanding amount of net credit of the government in the savings certificate sector is over Tk3.53 lakh crore in December. In November, the amount was Tk3.54 crore.

The net credit amount of the government was Tk3,628 crore in August this FY. The amount came down to Tk2,825 crore in September, falling further to Tk766 crore in October, Tk701 crore in November and Tk436 crore in December.   

When his comment was sought, Policy Research Institute (PRI) executive director Ahsan H Mansur said it is a good sign that the governments' net borrowing from savings certificates is falling as it has to pay high interest. It would be better if the government takes loans from banks at lower interest, he added.   

Earlier, people used to buy savings certificates taking resort to forgery which is regulated now. It too has contributed a lesser amount of credit to the government, said Ahsan Mansur.