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MONDAY, DECEMBER 11, 2023
Strict regulations, higher tax trigger fall in sales of savings tools

Economy

Rejaul Haque Kawshik
10 October, 2019, 10:45 pm
Last modified: 10 October, 2019, 10:49 pm

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Strict regulations, higher tax trigger fall in sales of savings tools

In August alone, the net sales dropped by 62.71 percent which was Tk1,499.37 crore in the same month last year

Rejaul Haque Kawshik
10 October, 2019, 10:45 pm
Last modified: 10 October, 2019, 10:49 pm
Strict regulations, higher tax trigger fall in sales of savings tools

Sales of savings certificates dropped by 96 percent in the first two months of the current fiscal year compared to the same period of the previous fiscal year, following an increase in tax on income from the savings tools. 

In July and August this year, the government sold National Savings Certificates worth Tk3,660 crore against Tk9,057 core in the same period last year, according to a report of the Department of National Savings.

In August alone, the net sales dropped by 62.71 percent which was Tk1,499.37 crore in the same month last year.

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In the budget for FY20, irrespective of investment ceiling, the government increased tax at source on savings instruments up to 10 percent to make it consistent with the bank interest rate.

Besides, providing a tax identification number (TIN) has been made mandatory for buying the NSCs amounting to more than one lakh; the buyers also have to do all transactions of savings tools through banks.

In recent years, sales of savings tools increased rapidly.  To discourage the savers from buying savings tools, the bankers and economists had long been urging the government to reduce interest on savings certificates.

However, instead of lowering interest rate on savings certificate, the government has imposed strict regulations on the sale of these certificates.

Meantime, the fall in savings certificate sale has come as a blessing for the banks as deposit growth saw a surge in recent months, easing liquidity crisis in the sector.

In July 2019, deposit in banks was Tk10,71,024 core, growing more than seven percent compared to the same month of the previous fiscal year. 

In the last fiscal year, the government sold savings tools worth Tk90,280crore. The government did not need to borrow from the banks as savings instruments' sale helped meet its borrowing target.

To meet its expenditure, the government borrowed Tk40,000crore plus from the banks in the first two and a half months of the current fiscal as the sales of savings tools fell. It accounted for 95 percent of the overall target set in the national budget for the ongoing fiscal. 

To meet the budget deficit, the government takes loans in two ways, one is foreign aid while the other is domestic sources – loans and savings certificates.

Savings certificates are considered a form of loan for the government because it has to pay monthly interest to savings certificate holders.

Bangladesh / Top News

national savings certificates

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