The net sales of national savings certificates plummeted in the July-March period.
Bankers said that the sales of the instruments plunged, as people were living off their savings amid soaring commodity prices
According to Bangladesh Bank data, the net NSC sales were Tk聽12,545 crore negative in the July-March period of the financial year 2023-24, compared with a negative Tk聽4,161 crore in the same period in the previous year.
In March alone, the net sales figure plummeted to a negative Tk聽3,653 crore, against negative Tk聽652 crore recorded in the same month of the previous year.
This negative trend in net sales occurs when the repayment of the principal amount exceeds the sales, leading to a net outflow of funds from the government鈥檚 exchequer or through loans taken from the banking system.
Bankers said that people were living off their savings due to acute and prolonged inflationary pressures in the country.
They said that many individuals lacked extra funds for savings and investments due to rising living costs.
Bangladesh鈥檚 overall inflation rate reached 9.74 per cent in April, remaining over 9 per cent since March 2023.
The central bank also raised interest rates, which increased deposit rates and treasury bond rates, making the national savings certificates less attractive to investors, they said.
The total outstanding investment in NSC reached Tk聽3,54,848 crore in July-March in FY24, declining from Tk聽3,59,848 crore in the same period of the past year.
To fund its activities in the current financial year, the government plans to borrow Tk聽18,000 crore by selling savings certificates.
In FY23, the government borrowed Tk聽80,858 crore against the repayment of Tk聽84,154 crore in the period.
The government amidst economic crises prioritised repayment over further borrowing through these instruments which bear high interest rates, according to bankers.
Similarly, in FY22, the government received only about Tk聽19,915 crore from the sales of NSCs, significantly lower than its target of Tk聽32,000 crore.
This declining trend has continued since FY21, the year of the Covid pandemic, when the government raised Tk聽42,000 crore, and FY20, when it raised Tk聽14,428 crore from selling NSCs.
Bankers attributed the decline in NSC investments to a reduction in interest rates by 1-2 per cent on all savings certificates in September 2021.
The introduction of a maximum limit and the mandatory inclusion of national identification documents during the purchase of savings certificates further exacerbated the decline, they said.
They said that people were reluctant to disclose their income and identity when purchasing these certificates.
The Bangladesh Bank has made it mandatory to submit the proof of the previous year鈥檚 income tax returns for investments in savings certificates worth more than Tk 5 lakh.
Additionally, the increased government bank borrowing of Tk 1,24,122 crore in FY23, with Tk 98,826 crore from the central bank, has intensified liquidity stress and inflationary pressures in the financial sector.