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Profit rates increased on national saving schemes

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NSS profit rates effective 1-1-2019

Pakistan Government on 30th April 2018 announced up to 1.09 percent increase in rates of returns for national savings certificates, breaking a 14-month spell of unchanged profit margins for the investment avenues mainly tapped by low-income groups.

“The National Savings Scheme (NSS) has revised the rate of returns on its different products ranging from 0.56 percent to 1.09 percent effective from new months,” the Central Directorate of National Savings (CDNS) said in a statement. “The rate of return on the National Savings Schemes have been increased after almost 14 months because since 2016 the State Bank of Pakistan (has been) rejecting the bids placed by the banks to buy Pakistan Investment Bonds.”

The central bank, however, recently accepted the bids for Pakistan Investment Bonds of three-, five- and 10-year. In January, the State Bank of Pakistan raised the benchmark interest rate 25 basis points to six percent after keeping it unchanged since May 2016.

CDNS is a premier financial institution offering retail government securities and savings products (known as national savings scheme) to small savers through diversified product mix. The institution has investor base of seven million and portfolio, which is around 30 percent of total banking deposits of nearly Rs12 trillion. Its share in domestic debt of government is around 19 percent. Most of its products are designed for low-income segments of the society.

The CDNS said rates of returns on Behbood savings certificates and pensioner benefit accounts have been revised by 0.72 percent to 10.08 percent. Rates on defence savings certificates increased 0.56 percent to 8.10 percent, while rates on special savings certificates rose 0.77 percent to 6.80 percent. Rate of return on regular income certificates was up 1.09 percent to 7.632 percent, while rate for saving account increased 0.55 percent to 4.50 percent.

The Directorate of NSS also increased rate of profit on short-term papers. The new rate on three-month short term paper has been increased 0.32 percent to 5.92 percent, 0.42 percent to 6.04 percent for six-month papers and 0.61 to 6.25 percent for one-year paper.

Government also planned to mobilise up to one billion dollars from Pakistan’s expatriates via savings certificates scheduled before the end of the current fiscal year. It invited national and international banks for managing the issue.

Overseas Pakistani savings certificates are aimed to launch before the close of this fiscal year. Initially, the certificates would be launched in the Gulf Cooperation Council market and later they would be launched in other countries in different phases. National Savings has already appointed a consortium of Ernst and Young, Haidermota and Company and Al Tamimi and Company as their financial and legal advisers for the structuring of the proposed certificates.

The certificates are the country’s first-of-its-kind risk-free security to channelize investments from overseas Pakistanis and a third party will manage the operational aspects of the certificates. CDNS recognizes overseas Pakistanis as a powerful resource for the national development and has designed the unique product to target the savings, which are coming from informal channels. The country received $14.6 billion in remittances from overseas Pakistanis in the first nine months of the current fiscal year, marginally up four percent over the corresponding period a year earlier.

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