Saving certificate investors withdraw Tk3,500cr more than their deposits in Jul-Feb FY23

Saving certificate investors have withdrawn Tk3,510 crore higher than what they have invested over the first eight months of FY23, according to latest Bangladesh Bank data, thanks to ongoing inflationary pressure, reduced interest rates, and new investment conditions.

The saving certificates saw a withdrawal of Tk59,372 crore against Tk55,862 crore of deposits during the July-February period. The situation in the previous Covid-hit fiscal year was even better than it.

In the same period of FY22, investments on the savings certificates increased by around Tk14,689 crore as people invested Tk71,056 crore against the withdrawal of Tk56,366 crore.Sector insiders and economists believe that the prolonged dollar shortage has triggered inflation and increased living costs, while the earnings of most people have been unchanged. In addition to that, the dollar crisis also affected capital machinery imports and the operation of new factories, which slowed down employment generation. To survive in such a tough economic situation, people are spending their life savings, which has been reflected in the latest data.

The government made tax identification number (TIN) mandatory for above Tk5 lakh investment on savings certificates which was another reason behind the fall in investment, they said. On interest rates, they observed that many banks are now offering higher interest rates than the reduced interest rates of saving certificates.

"There are two main reasons for the low investment in savings bonds. One is lower government borrowing targets through saving tools, and the other is inflationary pressure," said Mohammad Shah Alam, director of the Department of National Savings.

"If you go to the commodity markets, you can understand why investment in savings bonds has been on the decline. The prices of all kinds of goods have increased but people's incomes remained the same. So, they are losing savings," he told The Business Standard.

Generally middle-class people invest in saving certificates. Besides, there are some women who have no source of income except some savings, he added. "Besides, everyone now needs tax certificates to invest above Tk5 lakh on saving tools, it also contributed to the decline in fresh investment in the sector."

Ahsan H Mansur, executive director of the Policy Research Institute, believes that lower-income people with their backs against the wall are forced to withdraw savings to manage everyday life expenses. "Many of the investors are also reluctant to obtain TIN certificates for the investment."

On saving certificate investment limits, he said reduced investment limits have been discouraging investments on saving certificates.

It is worth mentioning that the point-to-point inflation, which has been on the decline with some fluctuations after hitting a decade-high in August last year, rose 0.21 percentage points to 8.78% in February, according to the latest data.

The overall inflation rate stayed above 8% for the past seven months despite the fall, causing significant discomfort for consumers.