The net sales of national savings certificates went down further in the July-March period due to high inflationary pressures and rising bank interest rates.
According to Bangladesh Bank data, the net NSC sales were negative Tk聽14,648 crore in July-April of the financial year 2023-24 compared with that of negative Tk聽3,579 crore in the same period in the previous year.
In April alone, the net sales plummeted to negative Tk聽2,103 crore, in contrast to a positive Tk聽581 crore in April of the previous year.
This negative trend in net sales occurs when the repayment of the principal amounts exceeds sales, leading to a net outflow of funds from the government鈥檚 exchequer or through loans taken from the banking system.
Bankers attribute this trend to people relying on their savings amid acute and prolonged inflationary pressures.
Rising living costs have left many without extra funds for savings and investments, they said.
According to Bangladesh Bureau of Statistics, the overall inflation rose to 9.89 per cent in May, the highest since October 2023, when it hit 9.93 per cent.
Inflation has remained near 10 per cent since March 2023.
The central bank鈥檚 increase in bank interest rates has made deposit rates and treasury bond rates more attractive, reducing the appeal of national savings certificates for investors, bankers said.
They said that people now preferred investing in government treasury bills and bonds due to their high-interest rate earnings.
Treasury bill interest rates have soared to a record 12 per cent.
The total outstanding investment in NSC reached Tk聽3,52,745 crore in July-April in FY24, declining from Tk聽3,60,430 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.
Amid economic crises, the government has prioritised repayment over further borrowing through these high-interest instruments.
Similarly, in FY22, the government raised only about Tk 19,915 crore from NSC sales, 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.
Bankers have 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 also made it mandatory to submit proof of the previous year鈥檚 income tax returns for investments in savings certificates worth more than Tk聽5 lakh.