Rate of return on cash certificates revised

CARACHI:

The government has revised up the profit rate on a few savings certificates for the general public after the certificate management company’s revenue jumped from sovereign debt securities in which it reinvests people’s money for their deliver returns.

The Central Directorate of National Savings (CDNS) revised the rate of return on savings accounts (SA) by 125 basis points to 13.50%. It improved the rate by 24 basis points to 12.60% on certificates of regular income (RIC), according to local research houses on Saturday.

The profit rate on Behbood Savings Certificates (BSC) and Retirees Benefit Account (PBA) remained unchanged at 14.16% each. Yields on Special Savings Bonds (SSC) were maintained at 13%, while the rate on Defense Savings Bonds (CDS) was also left at 12.40%.

CDNS reinvests individuals’ money in government bonds such as three to 12-month treasury bills and three- to 10-year Pakistan Investment Bonds (PIBs), depending on the duration of the bond. investment by retail investors from three months to 10 years.

The government uses the investments attracted by savings certificates and bonds.

Yields on Treasuries and GDPs have been rising steadily for about a year now, as the government’s reliance on domestic debt (investments received in certificates and bonds) has remained high to fund its high budget deficit.

Yields also rose in association with the reading of high domestic inflation and the central bank raised its policy rate by 800 cumulative basis points from the high in 11 months to two decades to 15% currently.

Investment in savings certificates, savings plans and premium bonds continued to decline over the last two consecutive years (fiscal years 21 and 22), mainly due to the discontinuation of premium bonds. high value and maturity of institutional investors’ investments.

Previously, the government had prohibited institutional investors from placing their savings in the certificates, as they had access to invest directly in treasury bills and GDPs. The government has also discouraged institutions from buying savings certificates under the terms of the IMF loan program for Pakistan.

CDNS manages an investment portfolio of approximately seven million retail and institutional investors.

The State Bank of Pakistan (SBP) reported that investment in savings certificates, schemes and prize bonds declined by 296 billion rupees in the first 11 months (July-May) of the previous year ended June 30, 2022.

The inflation reading agreed that some people would pull back from investing to survive in a high inflation reading environment, as the inflation reading hit a 14-year high near 25% in July.

In the previous financial year 2021, investors withdrew another 317 billion rupees from the instruments, according to central bank data.

As a reminder, the government has discontinued price bonds worth Rs40,000 each, Rs25,000, Rs15,000 and Rs7,500 and asked bondholders to cash them in.

The government removed bonds to check suspicions of corruption and encouraged businesses and individuals to use banking channels to settle payments instead of posting bonds.

The Central Board of National Savings (CDNS) has set a rolling investment target worth Rs 1.5 trillion in savings instruments in the current financial year 2022-23.

The Central Board of National Savings (CDNS) has set a savings target of Rs 1.5 trillion for the current financial year (2022-23).

Reports suggest that management is working to introduce Shariah-compliant savings instruments and digitize CDNS to attract new investments online.

Published in The Express Tribune, August 7e2022.

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