Interest on some savings tools may remain unchanged [ Business ] 17/07/2017
Interest on some savings tools may remain unchanged
The interest rates on some savings instruments may be kept attractive as it is right now to ensure social security of pensioners and the middle- and low-income groups.

“Their interest will be strongly protected,” said Hedayetullah Al Mamoon, senior secretary of the finance division at an informal briefing on Saturday.

However, the government may slash the interest rates on certain instruments to discourage institutional borrowers, according to Finance Minister AMA Muhith and other high officials of the ministry.

At present, there are four savings instruments, the interest rate on which varies from 11.04 percent to 11.76 percent.

More than 50 percent of the savings instruments sold every year are bought by institutional borrowers like banks and various state-owned enterprises, according to a finance ministry official.

“Those who bought the savings instrument are being identified.  The decision will be taken considering that nobody can take double, treble benefits,” Mamoon said.

Higher returns on savings certificates continue to increase the government's interest payment burden, according to data from the Directorate of the National Savings.

Subsequently, the government plans to cut the rates on savings tools to lessen the debt burden.

Sales of saving instruments in the first 11 months of fiscal 2016-17 were more than treble the government's target for the entire year.

A total of Tk 46,669 crore worth of savings certificates were sold in the July-May period against the full-year target of Tk 19,610 crore.

A committee has been formed to look into the issue of lowering the rate of interest on savings certificates and they have already held a meeting, Muhith said on Saturday.  On the basis of their recommendations, the government will take a decision on the matter, he said, adding that the opinions of the commerce and education ministers will also be taken.

On various occasions earlier this year, Muhith hinted at cutting the rates to align them with the banks' lending rates.

Currently, saving instruments maturing in five years offer the highest 11.76 percent interest rate, whereas the average deposit rate in the banking sector is 5 percent.

On Saturday the finance minister said the rate of interest on savings instrument is always kept higher than the market rate. “If the rate is much higher it disturbs the market.”

Muhith also said the government is planning to introduce a mandatory pension system for the private sector.

“I want to enforce it. But before that if the media people run a publicity about this that will be very good,” he added.
 
 
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