Profit rates on saving schemes slashed fourth time since July

KARACHI: The government on Tuesday trimmed profit rates on all savings schemes and accounts of the Central Directorate of National Savings (CDNS) for the fourth times since July after recent spate of policy rate cuts by the central bank.

According to a series of notifications issued by the ministry of finance, the return on regular income certificates has been reduced to 7.44 percent from 8.28 percent.

The profit rate was already brought down from 10.56 percent in April.

The return on special savings certificates has been scaled down to 7.15 percent from 8.10 percent. Previously, it was 11.13 percent. The new rates will be applicable with effect from June 2.

“In case the profit earned on or after the 1st February, 1992 on special savings certificates is drawn on due date, the undrawn profit will automatically stand invested with effect from the date of accrual,” a notification said.

Profit payable on the deposits made in savings bank accounts has been fixed at 6.5 percent per annum where withdrawals are made through other than cheques.

Likewise, the rate of return on Bahbood savings certificates has been slashed to 9.84 percent from 10.32 percent. It was 12.28 percent earlier.

Profit payable on defence savings certificates has been reduced to 8.05 percent from 8.54 percent.

The rates of return on pensioners’ benefit account and Shuhada’s family welfare account have been slashed to 9.84 percent from 10.32 percent.

The rate of profit on payable on the deposits made in savings accounts has been cut to 6.50 percent from 7 percent.

The rates of returns on short-term savings certificates have been slashed to 7.72 percent from 7.80 percent for three-month, 7.36 percent from 7.50 percent for six-month and 7.30 percent from 6.95 percent for one year.

Interest rates on savings scheme are linked to cut-off yield of long term Pakistan Investment Bonds (PIBs). In recent months PIBs yields fell sharply after the State Bank of Pakistan cut policy rate by 525 basis points in two months to ease impact of COVID19 on the economy.

The Central Directorate of National Savings was tasked to mobilise Rs352 billion in savings during the current fiscal year, as opposed to the actual collection of Rs410 billion in the last fiscal year.

In the first seven months, the directorate managed to collect Rs116 billion. The rate cut is believed to dent the revenue collection target of FY2020.