Investors surrender Rs250bln prize bonds till Jan

KARACHI: People have surrendered around Rs250 billion worth of ownerless prize bonds with Rs40,000 denomination since a ban imposed on them by the government in June last year for documentation of the economy.

The Central Directorate of National Savings (CDNS) data on Wednesday showed that the amount was surrendered till January 2020, which is around 97 percent of the total invested amount till May 2019.

The holders of bearer bonds of Rs40,000 denomination have been given March 31, 2020 as deadline to surrender their instruments otherwise the securities would not be acceptable as legal tender.

In June last year, the government announced to discontinue the circulation of Rs40,000 denomination national prize bonds. The investment in prize bonds of Rs40,000 denominations reached to Rs258.72 billion by May 2019.

However, since announcement the stock of bearer prize bonds fell sharply to only Rs9 billion by end of January 2020.

The State Bank of Pakistan (SBP) allowed the investors to exchange the unregistered prize bonds through three different modes. The SBP has barred the exchange of bearer prize bonds against cash.

However, the bonds 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 holder).

The bearer instruments have been known as parking lot for undocumented economy. Therefore, the government launched registered prize bonds of Rs40,000 denomination in March 2017 which could be purchased against certain requirements, including computerized national identity card (CNIC) 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 increased to Rs18.37 billion by January 2020 compared with Rs6.17 billion as of May 2019, showing an increase of 198 percent.

The SBP’s data showed that the bearer instrument could also be exchanged in savings schemes, such as special saving certificates or defence saving certificates.

The total investment into the saving certificates increased to Rs2.44 trillion by January 2020 compared to Rs2.2 trillion by May 2019.

The government planned to transform all the bearer prize bonds and saving certificates. In this regard, the government legislated to document the investment in prize bonds and saving schemes.

Under the rules, the CDNS will conduct biometric verification of all existing and new investors. Further, investors will be liable to explain source of income for investing in saving schemes. The central bank allowed the third option of conversions of the bearer prize bonds to direct transfer to bank account.

The deposits of the banking system increased to all time high of Rs14.67 trillion by January 31, 2020, compared to the deposits of Rs13.45 trillion in May 2019.