Profit rates on savings schemes raised by up to 125bps

KARACHI: The government on Saturday increased profit rates by up to 125 basis points basis on different National Savings Scheme (NSS) certificates in line with the higher policy rate and recent surge in cut-off yields of secondary market coupons.

The Central Directorate of National Savings (CDNS) raised profit rates on savings accounts and regular account. Profit rates on Pensioner Benefit Accounts, Behbood Saving Certificates, special savings accounts, and Defence Saving Certificates kept unchanged.

The profit on Pension Benefit and Behbud Saving and Special Certificates in National Savings will remain unchanged at 14.16 percent and 13 percent.

The return on saving accounts and certificates are linked with the central bank’s policy rates and are normally kept slightly higher to attract savings small savers without drastically affecting the government budget.

According to a series of notifications issued by the Ministry of Finance, the CDNS has increased the rate of profit on regular income was increased by 24 basis points each to 12.60 percent while the rate of profit on a savings account was revised upwards by 125 basis points to 13.50 percent.

The CDNS has dispatched revised rate sheets to all the regional offices with instructions that existing stock of blank savings certificates and regular income certificates would now be used by affixing rubber stamps along with revised rates before issuance.

The rates of national savings schemes are usually announced after every two months and are linked to cut-off yield of T-bills and long-term Pakistan Investment Bonds.

In the last auction the cut-off yield on the three-year T-bill stood at 15.75 percent, yield on the six-month paper at 15.80 percent and 12-month paper at 15.94 percent.

On July 07, the State Bank of Pakistan (SBP) raised the monetary policy rate by 125 basis points to 15 percent.

The government will launch rates of new Islamic products in September.

The announced increase in profit rates on different instruments of National Savings Schemes is primarily in a protective reaction to a nearly runaway inflation.

Consumer inflation accelerated to its highest in 14 years in July on runaway food prices, stoked by a battered rupee.

The rising inflation has eroded the purchasing power of fixed income groups such as salaried and pensioned ones.

The CPI inflation rose to 24.93 percent in July, whereas in July 2021, it was recorded at 8.4 percent. That compares with a 21.3 percent jump in June. This level was last seen in August 2008.