CDNS registers Rs222bln worth of prize bonds

KARACHI: The government has documented Rs222 billion worth of bearer bonds since its announcement in June to disband the unregistered securities with Rs40,000 denomination.

Statistics of the Central Directorate of National Savings (CDNS) on Tuesday showed that people had surrendered Rs222 billion worth of bearer bonds of Rs40,000 denomination till September 2019, which was around 86 percent of the total amount invested in the bonds till May 2019. On June 24, 2019, the government announced to discontinue the circulation of Rs40,000 denomination national prize bonds in the initial phase.

The investment in prize bonds of Rs40,000 denominations reached to record level of Rs258.72 billion by May 2019. Since the announcement, the stock of bearer prize bonds has been gradually falling and reduced to only Rs36.84 billion by September 2019. The State Bank of Pakistan (SBP), following the announcement, issued procedure for the banks to facilitate public in exchanging the unregistered prize bonds through three different modes. The SBP has barred the exchange of bearer prize bonds against cash. However, it can be redeemed against registered or premium prize bonds or can be converted into national saving schemes or face value (direct transfer to the bank account of bond bolder).

Soon after the announcement the deposits of the banking system increased to Rs14.45 trillion by June 30, 2019 as compared with the deposits of Rs13.45 trillion in May 2019.

The bearer instruments have been known as parking lot for undocumented wealth. Therefore, the government launched registered prize bonds of Rs40,000 denomination in March 2017 which could be purchased against certain requirements including computerised national identity card and valid bank account.

Following the ban on bearer prize bonds and its conversion through option of known documented manner, the investment in premium prize bonds of Rs40,000 denomination jumped to Rs15.86 billion by September 2019 compared with Rs6.17 billion as of May 2019, showing an increase of 157 percent.

The SBP said the bearer instrument can also be exchanged in savings schemes, such as special or defence saving certificates. The total investment into the saving certificates increased to Rs2.317 trillion by September 2019 compared with Rs2.2 trillion by May 2019.

The government is intended to transform all the bearer prize bonds into the registered securities. The CDNS, in collaboration with the SBP, is planning to issue scrip-less registered prize bonds amongst all denominations with objective to document the economy.