The total amount of loan from saving instruments will be almost 50% of the outgoing fiscal year’s deficit budget, which is now estimated at Tk98,674 crore

The government expects its borrowing from saving instruments will exceed Tk50,000 crore in the outgoing fiscal year against the target of Tk45,000 crore.

In June so far, an amount of Tk10,000 crore came from the sale of saving instruments.

“There has been a huge pressure of buying saving instruments in the month of June which marks the end of a fiscal year,” said Bablu Kumar Saha, Director General of the Department of National Savings.

He said the saving instruments are still preferred by the people to depositing in banks or investing in stocks as the profit rates of the instruments are relatively high.

“The people are increasingly choosing to buy saving instruments instead of depositing their money in banks or investing in stock markets,” Bablu Kumar said.

According to the Finance Division, the total government borrowing from saving instruments will be almost 50% of the outgoing fiscal year’s deficit budget which is now estimated at Tk98,674 crore.

An official said if the government loan from saving instruments crosses Tk50,000 crore, it will also create a fiscal indiscipline in the outgoing fiscal year.

According to the Department of National Savings, the government has so-far sold Tk60,519 crore saving instruments as of April 2017 while the principal payment paid was Tk18,419 crore. An amount of Tk12,914 crore was also paid as interest.

As a result, the net amount stands at now Tk42,099 crore from the sale of saving instruments as of April 2017, which is 93.55% of the government’s total credit target in the current fiscal year.

The government has a target to borrow a net amount of Tk45,000 crore in the revised budget during the fiscal year 2016-17.

In the revised budget, the principal amount is Tk22,000 crore and the profit is Tk15,630 crore.

In the FY2017-18, the target of total sale of saving instruments is Tk60,000 crore, the principal amount payment is Tk29,850 crore and the profit is Tk19,780 crore.

Now the government wants to encourage people to go to stock market and the banks reducing the profit rate of the saving instruments.

Earlier, Finance Minister AMA Muhith said: “We have already taken initiative to rationalise the profit rate (of saving instruments) so the people go to banks or stock markets.”

The profit rates of saving instruments currently range from 11.04% to 11.70%.

Although the present rates are after slashing down by 1%-2% in the FY2014-15, they are still high compared to the treasury bill, bonds and bank deposit interest.

Finance Division’s Credit Debt Management Committee (CDMC) described the nature of taking loan from the government window as an “open tap” source.

The CDMC has identified three causes behind the rise in demand of the saving instruments: the reduction of banks’ fixed deposit rate, the people’s reluctance to invest in stocks and reduction of tax of saving instruments.

CDMC has advised to reform the operation of the national saving instruments. As per the initial proposal of the Department of National Savings, several steps were taken to squeeze the size of amount of saving instruments.

According to the proposal, the people have to inform the authorities concerned about the source of income for depositing or investing in the state saving instruments.

Organisations investment should be stopped while the investment limit in the sectors other than pension scheme will be lowered to Tk25 lakh from the existing Tk45 lakh, the proposal said.

The under-aged group will not purchase the national saving certificates and the profit rate of saving certificates will be more lucrative for the older men and women, it said.

According to the proposal, the functions of the Department of National Savings will be digitalised.