Profit margins on national savings schemes reach six-year high

KARACHI: The Central Directorate of National Savings (CDNS) pushed the profit rates on savings certificates up to six-year high on Tuesday, as frequent rise in interest rates by the central bank made the investment avenue attractive in debt market.

Rates of profit on Behbood savings certificates, pensioners benefit and Shuhada family welfare accounts increased 2.40 percent to 14.28 percent.

Profit rate on special saving certificates rose 2.74 percent to 11.57 percent. Rate of return on regular income certificates was up 2.28 percent to 12 percent.

Rate of return on defence certificates shot up 2.44 percent to 12.47 percent, while rate of return on saving accounts increased 1.50 percent to 8.50 percent.

For short-term savings certificates, profit rate was revised up 1.52 percent to 9.80 percent on three-month tenure, 1.50 percent to 9.88 percent on six-month and 1.50 percent to 9.98 percent on one-year tenure, according to a news statement.

The rates on national savings schemes are announced after every two months and linked to cut-off yield of long-term Pakistan Investment Bonds.

Profit rates on savings certificate mostly remained unchanged for the past couple of years as the central bank adopted soft monetary stance.

The low-key profit rates could easily be gauged from the downward investment flows into the government securities.

Investments in government securities amounted to Rs202 billion in the last fiscal year of 2017/18 compared to Rs207 billion in 2016/17, Rs233 billion in 2015/16, and Rs337 billion in 2014/15.

The CDNS, however, announced back-to-back five increases in profit margins on saving certificates during the last calendar year owing to multiple hikes in the central bank’s benchmark interest rates.

The State Bank of Pakistan raised the policy rates by cumulative 425 basis points to 10 percent since January last year.

The current benchmark interest rate is four-year high.

The CDNS raised Rs84 billion in savings from July 1 to December 28, 2018. The Central Directorate of National Savingshas set Rs224 billion as net target of savings for the fiscal year 2018/19, a senior official of CDNS told APP.

The official said the Central Directorate of National Savings notified upward revision

in the profit rates for various saving certificates.

“The instant revision was made in the backdrop of current market scenario and in accordance with the government’s policy to provide market based competitive rate of return to the investors of national savings,” the official said.

The official said the proposal to

launch registered prize bonds, which offer coupons as well as prizes, is also under consideration.