The government presses the brake on sales of national savings certificates (NSC) by way of slashing receivable commissions of commercial banks against transactions in these borrowing tools.
The banks will receive commissions at a rate of 0.05 per cent from now on instead of 0.5 per cent on sales of the government borrowing tools.
And banks will not receive more than Tk 500 on each of the registrations or purchases of savings tools, the latest decision says, thus halving the ceiling of receivable commission from Tk 1000.
The Internal Resources Division (IRD) under the Ministry of Finance (MoF) made the new rate of commissions effective from September 16, 2021.
It has issued a circular making the new rate of commissions effective for five types of savings tools: family savings certificate, five-year-term Bangladesh Savings Certificate, three-monthly profit-based savings certificate, pensioners' savings certificate, and post office bank-term account (on total deposited amount).
Talking to the FE, Director-General of the Directorate of National Savings (DNS) Maksuda Khatun said the government is trying to bring down the benefits of savings instruments considering its increased debt burden due to high rates of yield on the tools.
There may be cuts in rates of interest in future to bring discipline to the financial market and resolve inconsistencies with the yield of bank deposits.
"There was pressure from banks too to bring down rates of interest on savings tools as many of the bank depositors rush for the NSC for higher yield," she said.
"Earlier, we used to encourage investment in savings tools but now the government is thinking otherwise," she added.
The DG said banks were receiving significant amounts of commissions as sales of savings instruments surging gradually.
It is a secure investment where banks also started encouraging investments in recent times, which was not practised earlier, she said.
A senior official of the IRD said the MoF has to spend around Tk 400 million as commissions to banks against sales of savings tools.
NSC is meant for benefiting the marginal-income group of people, the official said.
"We have found that many of the well-off groups of people are taking advantage of the subsidised savings instruments of the government," the official added.
The government will have to discourage the subsidized tools as the country's economy is growing fast, the official said, explaining the justifications for the squeeze.
Managing Director and Chief Executive Officer (CEO) of Mutual Trust Bank Limited and former chairman of the Association of Bankers Bangladesh (ABB) Syed Mahbubur Rahman finds such drastic reduction in banks' commissions "unjust" as banks have to provide prompt services to the clients who invest in savings tools.
"We have to pay back the clients immediately they raise the claim but banks have to wait for getting the money back from the government," he said.
Banks collect numerous taxes and charges on behalf of the government too that sometimes disrupts smooth service delivery to the regular clients, he pointed out.
According to DNS data, net government borrowings with the savings tools increased 67.47 per cent in July of the current fiscal year compared to that of the corresponding period of last fiscal.
Last year, the net sales of NSC rose by Tk 275.31 billion year on year to stand at Tk 419.59 billion.
In FY21, net sales of NSC stood at Tk 219.59 billion higher than the government's initial budgetary projections.
It was also Tk 116.57 billion higher than the government's revised budgetary target for the year.
Last year, the initial target of the government was to borrow Tk 200.00 billion against NSCs, which was revised upward to Tk 303.02 billion later.
Deposit rates of several banks have dropped to as low as 2-4 per cent while investors in savings tools receive yield at 11 to 12 per cent.
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