CDNS raises profit rates up to one percent on saving certificates

KARACHI: The Central Directorate of National Savings (CDNS) on Wednesday announced increases in profit rates on saving certificates

by up to one percent – third consecutive hike during the current calendar year – after a cumulative 1.75 percent rise in key interest rates by the central bank since January.

The new rates, increased between 0.96 percent and one percent, are applicable from September 1.

Savings Account got the highest jump of one percent in profit rate to settle at six percent from the previous five percent. Profit rates on short-term savings certificates of three-, six- and 12-month were revised up 0.96 percent to 7.36 percent, 7.42 percent and 7.52 percent from 6.40, 6.46 and 6.56 percent, respectively.

Rate on Special Savings Certificates (registered)/Accounts increased 0.77 percent to 7.87 percent from 7.10 percent. Rate on Defence Savings Certificates increased 0.75 percent to 9.05 percent from 8.30 percent. Rate on Regular Income Certificates rose 0.744 percent to 8.784 percent from 8.04 percent.

Rates on Behbood Savings Certificates, Pensioner Benefit Accounts and Shuhada Family Welfare Account rose 0.72 percent to 10.92 percent from 10.20 percent, respectively.

The latest increase in profit rates has been third times in row during 2018, following a sharp rise in yields of Pakistan Investment Bonds after rise in benchmark interest rates of the State Bank of Pakistan in the last six months.

The central bank raised its key policy rate by 175 basis points to 7.5 percent since January as inflation started creeping up and reached almost four-year high of 5.8 percent in August.

The saving rates remained stagnant from February 2017 to May 2018. Defence saving certificate’s rate, however, rose 1.51 percent to 9.05 percent from 7.54 percent since May. Rates on Behbood and Pension certificates increased 1.56 percent.

Rate on Special Saving rose 1.60 percent. Rate on Regular Income was up 1.94 percent. Rate on Saving Accounts increased 2.05 percent since May. In February 2017, the applicable rates on Behbood and Pension certificates were 9.36 percent, Special Savings (6 percent), Regular Income (6.54 percent) and Saving Account (3.95 percent).

The central bank, in its latest bulletin, said investment in Behbood certificates was the highest at Rs794 billion, while it was Rs381 billion in Special Saving, Rs347 billion in Regular Income and nearly Rs336 billion in Defence Saving Certificates.

Overall, the size of investment in national savings certificates reached around Rs3.6 trillion. The certificates attracted Rs202 billion in investments during the last fiscal year compared to Rs207 billion a year earlier.

CDNS is a premier financial institution, offering retail government securities and savings products (known as national savings scheme), on a level playing field to small savers through diversified product mix.

The institution has investor base of seven million and portfolio, which is around 30 percent of the total banking deposits. Its share in the domestic debt of government is around 19 percent.

CDNS has recently prepared a new instrument attracting overseas Pakistanis who sent around $20 billion in the last fiscal year of 2017/18. The spadework on the new products has been completed and an approval from the federal cabinet is awaited.

The overseas Pakistanis could invest as low as $1000 or equivalent in rupee in the new instruments initially bearing returns of almost six to seven percent per annum and with maturity of three to five years.

Government officials were expecting $500 million to $1 billion in investment in the upcoming certificates from expats.