The government is gradually reducing borrowing from savings certificates. It wants to reduce the pressure of high interest rates and lean more towards treasury bills and bonds with comparatively cheap interest rates.
The Finance Ministry has decided to further reduce the interest rates on savings certificates from next January. As a result, the highest interest rate in this sector may come down to close 10 per cent by the beginning of next year.
According to experts, savings certificates are one of the internal sources from which the government borrows to meet the budget deficit. But the interest rates are relatively high, which has become costly for the government.
In such a situation, the government has planned to make treasury bonds and bills with comparatively low interest rates the main source of borrowing.
The National Savings Department currently operates a total of 11 savings schemes. These include four types of savings certificates, two post office savings bank accounts, one postal life insurance, one prize bond and three special bonds for expatriates.
The rate of return against investment in each scheme is different. The highest being is currently 11.98 per cent and the lowest at 9.72 per cent. In July this year, interest rates were reduced by 47 to 57 basis points in several schemes.
If it is reduced by another one to one and a half percent in January, savings certificates will be much less profitable for the common people than before. On the other hand, since the interest rate on treasury bills and bonds is around 9.5 per cent on average, the government is able to borrow cheaply from them.
According to Bangladesh Bank, the auction review on October 13 shows the average interest rate on 91-day treasury bills is 9.50 per cent, the average interest rate on 2-year bonds is 9.44 per cent and the interest rate on 10-year bonds is 9.90 per cent.
Net sales of savings certificates are continuously decreasing due to the reduction in interest rates. According to Bangladesh Bank, net sales in the 2024-25 fiscal are negative Tk 6,063 crore. In 2023-24, it was negative Tk 21,124 crore, which is the highest in the last few years. If this trend continues, it is feared that the sale of savings certificates will decrease further in the future.
According to analysts, reducing interest rate on savings certificates may be a relief for the government, but it will put pressure on common people who rely on savings. Especially the elderly, retired and lower-middle class people who rely on savings certificates for safe investment will be affected.
Economists say reducing the interest rate on savings certificates by the government is a policy decision, which will reduce the cost of borrowing to meet the budget deficit. However, it will have a negative impact on the common people.
