Profit rates on National Savings increase

KARACHI: The Central Directorate of National Savings (CDNS) has pushed up profit margins on its saving certificates for the fifth time this year owing to frequent hikes in the central bank’s benchmark interest rates.

The increases on saving instruments are in the range of 0.96 to one percent and effective from Thursday, CDNS said in a statement.

Profit rates on Behbood savings certificate and pensioners benefit and Shudda family welfare accounts increased 0.96 percent to 11.88 percent. Rate on saving account rose one percent to 7 percent. Profit rate on defence savings certificate increased by 0.98 to 10.03 percent. Rate on special savings certificate rose one percent to 8.60 percent. Profit rate on regular income certificate increased 0.94 percent to 9.72 percent.

The latest increases have been a fifth in a row in 2018 as the State Bank of Pakistan hiked its main interest rate by 275 basis points to 8.5 percent since January.

Profit rates on pensioners and Behbood certificate increased 4.28 percent since January from 7.60 percent. Special savings certificates saw a cumulative 2.60 percent increases as against six percent. Rates on regular income certificates rose 3.18 percent from 6.54 percent. Savings account saw aggregate 3.10 percent increases as opposed to previous seven percent. Profit rate on defence savings certificate increased 2.49 percent since earlier this month from 7.54 percent.

The rates on national savings scheme 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 during the last three years, which 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 central bank, in its latest report, acknowledged the falling investment trend with regards to government securities over the past three years.

Analysts said the downbeat investment was due to lower profit rates on government securities, while additional withholding tax on non-filers also brought down deposits to banking sector.

The government has been charging additional withholding tax on financial transactions by the non-filers of income tax returns for the last three years. The tax disadvantage, however, marginally improved the number of return filers to a little over 1.5 million.