Sales of savings tools maintained its upward trend in the first quarter of the current fiscal year.
Higher return from the savings instruments compared to banks’ deposit products contributed to the surge.
According to the data available with the Directorate of National Savings, net sales of the government savings tools increased by 5.65 per cent to Tk 13,412 crore during the July-September period of the FY19.
Increasing sales of government savings tools have caused the lenders to lose their deposit bases, said Syed Mahbubur Rahman, chairman of the Association of Bankers, Bangladesh — a platform of private banks’ managing directors.
As a result, some banks are offering as high as 7-9 per cent interest rates on several fixed deposit products, he said, adding that they are compelled to do it in order to survive the competitive market, even though it goes against the decision by private bank sponsors to keep the interest rate on deposits at 6 percent.
As the interest rate, ranging between 11.04 per cent and 11.76 per cent, of the government savings instrument is attractive to the savers, customers are leaning towards buying more savings tools in large numbers, he said.
M Kamal Hossain, managing director of Southeast Bank, said customers now prefer government savings tools to avoid the fluctuating interest rates on banks’ deposit products.
AB Mirza Azizul Islam, a former finance adviser to a caretaker government, said the bulky investment in savings tools will pose serious adverse implications on the fiscal side.
The government, over the recent years, gave out more than 20 per cent of its expenditure to interest payment for its borrowing from different sources, he said.
The largest part of interest payment now goes for the national savings instruments, which has made the government not take low-cost loans from banks, he also said.
In fiscal 2017-18 against the target of Tk 28,203 crore, the government took a nominal amount of Tk 5,666 crore from the banking sector by the means of treasury bills and bonds.
The government pulled back its stance several times to slash the interest rate of savings instrument due to growing pressure from different quarters.
Mirza Azizul Islam said if the government does not cut the rate, it should stop borrowing from the tools once the budgetary target amount is reached.
Net sales of savings certificates in fiscal year 2017-18 stood at Tk 46,758 crore against the target of Tk 44,000 crore.