Savers prefer national savings tools as bank interest shrinks

As the scope for investments in banks is shrinking in the wake of declining interest rates, savers are resorting to the national savings tools.

The latest official data shows net sales of saving certificates reached over Tk 25,700 crore in the first seven months of the current fiscal year, much higher than the annual target of Tk 20,000 crore.

“There has been an increasing demand for national savings tools since April last year,” said an official of the Department of National Savings.

On April 1, 2020 the central bank capped the lending rate for commercial banks at 9%. Consequently, interest on deposits went down to as low as 3%, much lower than around 6% inflation rate. Many savers took their money out of the banks to these savings certificates that pay over 10% interests.

Sufia Khatun, a widow who lives on the return from her savings in a bank, said she withdrew her money from the bank as she was getting less than 5% return.

“Later, I have invested the amount in national savings certificates after taking my tax identification number,” she told the Business Insider Bangladesh.

The government in fiscal year 2019-20 tightened the terms and conditions for investments on the savings instruments and introduced an online management system to reign in the buying spree and to reduce costly borrowing.

As a result, the government’s borrowing through savings certificates dropped to Tk14,428 crore in the FY20 against over Tk49,939 crore in net sales a year ago.