Saving schemes fetch Rs18.231bln in July

KARACHI: National Savings Schemes (NSS) inflows slightly increased to Rs18.231 billion in the first month of fiscal year 2016/17 from Rs16.581 during the corresponding month of the previous year, the central bank said Wednesday.

The government raised an amount of Rs232.09 billion from the savings schemes during the last fiscal year against the inflows of Rs337.05 billion in FY14.

Analysts said that the savings schemes were attracting investors as they preferred to put their money in risk-free and higher return fixed investments.

Savers were not relying on bank deposits, since the interest rates were at record lows. The low interest rates hurt their savings. Savers earn relatively higher profit rates on other instruments, such as NSS, Pakistan Investment Bonds (PIBs), and mutual funds.  

However, the low amount raised by the government in the last fiscal year was not justifiable in the presence of higher return offering on different NSS saving products.

It seemed that investors had poured more cash holdings into alternative investment channels ie, equity market, gold, and real estate in FY16.  

Analysts believe reduction in NSS inflows is a short-lived phenomenon. These schemes are expected to attract more deposits. The reason is banks are not keen to compete with NSS for deposits due to declining interest rates.  

The federal government revised upward profit rates on NSS for the investment made on or after August 1, 2016. The instant revision was made in the backdrop of the 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 new rates for Special Savings Certificates, Regular Income Certificate, Defence Savings Certificates, and Savings Accounts have been fixed at 7.63 percent, 08.52 percent, 09.15 percent, and 04.75 percent, respectively.

The new rates for short-term Savings Certificates of three months, six months and one year have been fixed at 6.56 percent, 6.60 percent, and 6.65 percent, respectively.

However, the profit rate of return for specialised Savings Schemes like Bahbood Savings Certificates and Pensioners’ Benefit Account has also been revised and fixed at 11.04 percent in order to provide a safety net to the vulnerable segment of the society.