In July, the first month of the new financial year, net sales of savings certificates have gone down about 54%.
Net sales of savings certificates in July was Tk2104 crore which only a month before in June was Tk4,573 crore, according to Bangladesh Bank information.
Total deposits in the first month of the current financial year amounted toTk5,365 crore, 38.37% less than a year ago in July of the last financial year.
In August last, the government set the minimum interest rate on bank deposits at 5.5% which earlier was 2% to 4%. In some banks, it was even less than that. With such low interest rates, people turned to buying savings certificates as 'safe' and profitable investments with far better returns than the lower bank interest rates.
Recently the government has cut the rate of return on investment (ROI) on all types of savings certificates. However, on savings certificate investments of under Tk15 lakh, the ROI remains unchanged.
Under the new rules, returns on five-year Bangladesh Savings Certificates, three-month Savings Certificates, five-year Pensioner Savings Certificates for retirees, and five-year Family Savings Certificates have been reduced by more than 1%.
The current 7.5% returns on general Post Office Savings Bank accounts has not been changed.
Besides borrowing from banks, the government also borrows from savings certificates to meet their budget deficit.
Net sales is calculated, deducting from each month's sales of savings certificates, interest and principal paid out on savings certificates encashed. The net earnings are used by the government to implement state programmes.
Usually the government borrows from foreign and domestic sources to meet the budget deficit. The target for borrowing from the domestic sector in the current financial year is Tk1,13,453 crore. Of this, the government will borrow Tk76,452 crore from banks, and Tk32,000 crore from national savings certificates. Tk5,001 crore will be borrowed from other sectors.
In the outgoing 2020-21 fiscal year, the government borrowed three times more than in the previous fiscal year. According to the Department of National Savings, the government borrowed about Tk42,000 crore from savings certificates in the outgoing fiscal year, up from Tk14,428 crore in the fiscal year before that.