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August 12, 2020

Investment in registered prize bonds up 148pc in FY20

Business

August 12, 2020

KARACHI: Investment in registered Rs40,000 prize bonds jumped by a staggering 148 percent in fiscal year 2019-20 as a result of the government’s unrelenting efforts to document the economy, latest numbers showed on Tuesday.

Data released by Central Directorate of National Savings (CDNS) presented that investment in registered Rs40,000 prize bonds surged to Rs19 billion by June 2020 compared with Rs7.66 billion in the same month of the last year.

The surge in investment into premium prize bonds may be attributed to the initiatives of the government to ensure verified source of income to comply with requirement of Financial Action Task Force (FATF).

Another reason for this growth is the discontinuation of bearer prize bonds of Rs40,000 denominations.

The ministry of finance recently issued ‘National Saving Schemes (AML/CFT) Rules, 2019 for curbing the involvement of money, used for terror financing and money laundering.

Under these rules the authority shall collect all information of persons investing in saving schemes. The information shall include name, address, CNIC, passport etc. Further, the investors, either existing or new, shall be required to provide the source of money related to amount of investment.

Sources in banking sector said such actions were taken in order to comply with the FATF requirement and to document the economy.

The government launched premium prize bonds in April 2017 to document the economy. The premium prize bonds are being issued only against CNIC with valid bank accounts.

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

The pace of investment in this premium prize bonds witnessed significant increase from July 2019 after the announcement of the government to discontinue the bearer bonds of Rs40,000 on June 24, 2019.

The Rs40,000 bearer bonds were to be completely discontinued as legal tender by March 2020. However, due to COVID-19 lockdown the government extended the deadline for exchanging the bearer bonds up to December 31, 2020.

A massive withdrawal of investment has been seen in the bearer instrument as the total investment, which was Rs258 billion in May 2019, reduced to Rs756 million by June 2020.

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