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February 6, 2020

Investment in premium prize bonds jumps over 200pc


February 6, 2020

KARACHI: Investment in premium prize bonds of Rs40,000 denomination surged by over 200 percent (year-on-year) in December 2019 owing to discontinuation of bearer bonds of the same category amid government’s steps to document the entire investment in National Saving Schemes, data showed on Wednesday.

Statistics released by Central Directorate of National Savings (CDNS) presented the investment in registered Rs40,000 prize bonds increased to Rs17.71 billion in December 2019, compared to Rs5.83 billion in the same month last year, a growth of 203 percent.

In order to document the economy the previous government had launched premium prize bonds in April 2017. These prize bonds are being issued only against CNIC (Computerised National Identity Card) with valid bank accounts.

Further to make the instrument attractive the government also announced bi-annual profit, which transferred directly to the bond holders.

However, the pace of investment in these premium prize bonds was seen from July 2019 after the announcement of the government on June 24, 2019 to discontinue the bearer bonds of Rs40,000.

The bearer bonds of Rs40,000 will be completely discontinued as legal tender by March 2020. A massive withdrawal of investment has been seen in the bearer instrument as the total investment, which was at Rs258 billion in May 2019, reduced to Rs14.54 billion by December 2019.

The sources said since the withdrawal of investment from bearer bonds was allowed only through prescribed mode, therefore the money had become part of documented economy.

The State Bank of Pakistan (SBP) in a circular had said the bearer instrument could be exchanged in savings schemes such as Special Saving Certificates (SSC) or Defence Saving Certificates (DSC). The total investment into the saving certificates increased to Rs2.43 trillion in December 2019 as compared with Rs1.92 trillion in the same month a year ago.

The third mode of exchange the bearer bonds was direct transfer to bank accounts. This has reflected that the deposits of baking system increased to record high of Rs14.63 trillion by December 2019 as compared with Rs13.36 trillion by end of same month a year ago.

The sources said the investment also witnessed increase due to measures of the government to document all instruments of National Saving Schemes as per conditions of Finance Action Task Force.

In this regard the ministry of finance had notified National Savings Schemes (AML and CFT) Rules, 2019. Under these rules the CDNS through third party will conduct Know Your Customer (KYC) and Customers Due Diligence (CDD) of all existing and new investors. The CDNS will ask all the investors about their annual investment and source of earnings under KYC and CDD in order to ensure clean money invested in the schemes.

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