Sales of National Savings Certificates in 2010-11 fiscal dropped by nearly Tk 9,534 crore compared to the previous year because of the tax imposed by the government on profits from savings schemes.
National Savings Directorate officials said the net sales of NSCs stood at Tk 2,056.90 crore in 2010-11 compared to Tk 11,590.64 crore in 2009-10 fiscal.
The sales of the certificates in the last fiscal were 77 per cent less than the target set at Tk 7,477 crore.
High interest rates of commercial banks also caused the sales of certificates to go down, the officials added.
This year the government has fixed the target of NSCs sales at Tk 6,400 crore and experts are optimistic about the increase in sales due to some new initiatives taken in the current fiscal by the government.
The NSD officials said that in the first month of July the sales of NSCs increased as the government announced new rates of savings certificates, social security premium and tax at source reduction of 5 per cent.
Sales of NSCs dropped as investors cashed more NSCs to invest in the booming stock market, said officials.
Centre for Policy Dialogue executive director Mustafizur Rahman said that the main reasons for the fall in investment in the savings certificates were the surges in stock prices before the January market crash, tax on profits and the low deposit rates of banks.
He said that the new initiative to cut tax at source of 5 per cent instead of previous year's 10 per cent would help increase NSC sales.
'Government's bank borrowing rose significantly due to over emphasis on the banking system. The pressure will ease if there is enough investment in the NSCs,' he added.
He suggested that the government should emphasise on local investments to reduce pressure on the economy as well as habit of depending on the external sources.
The NSC has three types of savings certificates, the 5-year period Bangladesh Savings Certificates, the three-month profit-based savings certificates and the Pensioner Savings Scheme Certificates.
The Post Office Savings Bank has two types of savings scheme—term savings and general savings. The interest rate for term savings is 10 per cent and for the general savings 7.5 per cent.
Past interim government's finance adviser AB Mirza Azizul Islam said that small and middle income people invested their money in the NSCs for security.
'The decision of tax at source on the NSCs pressured the total investment in this sector but it will rise in this fiscal as the government has reduced the tax on profit and also increase in interest rate,' he said.
The low rate of investment in NSCs and booming capital market last year were very much related as people invested their money in the stocks instead of NSCs, Mirza Azizul said.
'The attractive interest rate in the deposit schemes is also a reason for less investment in the savings certificates,' he added.
Source : New Age
