Govt reduces profit rates on NPCs

KARACHI: The government has lowered the rate of return on conventional Naya Pakistan Certificates (NPCs), as reported by a central bank circular released on Thursday. This adjustment aims to align the rates with the decline in interest rates in Pakistan and other respective countries.

This is the first decline in NPC returns since the State Bank of Pakistan initiated its monetary easing in June 2024. Last month, the central bank cut its benchmark interest rate by 100 basis points to 12 percent, as inflation eases and economic growth appears poised to pick up after a cumulative 1,000 basis points of rate cuts over the past six months.

“The rate cut on Naya Pakistan Certificates (NPCs) lowers borrowing costs while keeping them highly attractive for overseas Pakistanis, as returns remain well above global fixed-income yields,” said Saad Hanif, the head of research at Ismail Iqbal Securities.

“This move signals confidence in improving macroeconomic stability, supports fiscal discipline, and ensures sustained investor interest in Pakistan’s financial instruments,” Hanif added. Awais Ashraf, director of research at AKD Securities Limited said, “We don’t foresee any significant reduction in inflows in NPC as rates are still high. However, it will divert some of the flows to equities from overseas as evidenced from recent uptick in account opening at the PSX under Roshan Digital Account.”

According to the SBP’s circular, the rate of return (gross annual return before tax) with integral multiples of $1,000, with increments of $500, has changed as follows: the three-month rate has decreased to 7.0 per cent from 8.25 per cent, the six-month rate has fallen to 7 percent from 8.5 per cent, and the one-year rate has been adjusted to 7 percent from 9 percent. For three-year and five-year investments, the profit rate is now set at 7.50 percent, down from 8.0 per cent.

For an investment of Rs10,000, with increments of Rs1,000, the rate of return has decreased as follows: for three months, it has dropped to 13.50 per cent from 21 per cent; for six months, to 13.5 per cent from 21.25 per cent; for one year, to 13 per cent from 21.5 per cent; for three years, to 12.50 percent from 17.5 per cent; and for five years, to 12.5 per cent from 15 per cent.

For an investment of GBP1,000, with integral multiples of 500, the rate of return will be 7.25 per cent for three months, six months, and 12 months. The rate of return for three-year and five-year NPCs will be 7.5 per cent.