The net sales of national savings certificates further plunged in the 2023-24 financial year compared with that in the previous financial year due to high inflation and rising bank interest rates.
Bangladesh Bank data showed that net NSC sales were negative Tk 21,124 crore in July-June of FY24 compared with that of negative Tk聽3,295 crore in the same period of the previous financial year.
In June alone, the net sales dropped to negative Tk聽3,381 crore, contrasting with a negative Tk 267 crore in June 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, the overall inflation hit 11.66 per cent in July and has remained near 10 per cent since March 2023.
The inflation in July was higher than the average 10.9 per cent inflation calculated by the Bangladesh Bureau of Statistics 12 years ago in 2010鈥�11.
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 3,46,269 crore in July-June of FY24, down from Tk聽3,60,705 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 80,858 crore against repayments of Tk 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.