The net sales of national savings certificates further declined in the July-May period of the 2023-24 financial year due to high inflation and rising bank interest rates.
Bangladesh Bank data showed that net NSC sales were negative Tk聽17,742 crore in July-May of FY24 compared with that of negative Tk聽3,028 crore in the same period of the previous financial year.
In May alone, the net sales dropped to negative Tk聽3,094 crore, contrasting with a positive Tk聽551 crore in May of the previous year.
This negative trend occurs when principal repayments exceed sales, leading to a net outflow of funds from the government鈥檚 exchequer or through loans from the banking system.
Bankers said that this trend reflected that people were 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 the Bangladesh Bureau of Statistics, overall inflation hit 9.7 per cent in June and 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.
Bankers said that people now preferred investing in government treasury bills and bonds due to their high-interest rate earnings, with treasury bill interest rates soaring to a record 12 per cent.
The total outstanding investment in NSC reached Tk聽3,49,650 crore in July-May of FY24, down from Tk聽3,62,260 crore in the same period of the previous year.
To fund its activities this financial year, the government planned to borrow Tk聽18,000 crore by selling savings certificates in FY24.
In FY23, the government borrowed Tk聽80,858 crore against repayments 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 32,000 crore.
This declining trend has continued since FY21, the year of the Covid pandemic when the government raised Tk 42,000 crore.
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 have further exacerbated the decline, they said.
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 5 lakh.