Net sales of national savings certificates (NSCs) continued to decline in the July-May period of the financial year 2023-24, primarily due to high inflation and rising bank interest rates.

According to Bangladesh Bank data, net NSC sales were negative Tk 17,742 crore in July-May FY24, a significant drop from the negative Tk 3,028 crore during the same period the previous financial year.

In May alone, net sales plummeted to negative Tk 3,094 crore, in stark contrast to a positive Tk 551 crore in May of the previous year.

This negative trend indicates that principal repayments exceeded sales, resulting in a net outflow of funds from the government’s exchequer or necessitating loans from the banking system.

Bankers explained that this trend reflects people’s reliance on their savings amid acute and prolonged inflationary pressures.

Rising living costs have left many without extra funds for savings and investments.

The Bangladesh Bureau of Statistics reported that overall inflation hit 9.7 percent in June and has remained near 10 percent since March 2023.

The central bank’s increase in bank interest rates has made deposit rates and treasury bond rates more attractive, diminishing the appeal of NSCs for investors.

Bankers noted that people now prefer investing in government treasury bills and bonds due to their high-interest rate earnings, with treasury bill interest rates reaching a record 12 percent.

Total outstanding investment in NSCs reached Tk 3,49,650 crore in July-May FY24, down from Tk 3,62,260 crore in the same period of the previous year.

To fund its activities this financial year, the government planned to borrow Tk 18,000 crore by selling savings certificates in FY24.

In FY23, the government borrowed Tk 80,858 crore against repayments of Tk 84,154 crore. Amid economic crises, the government has prioritized repayment over further borrowing through these high-interest instruments.

In FY22, the government raised only about Tk 19,915 crore from NSC sales, significantly lower than its target of Tk 32,000 crore.

This declining trend has persisted since FY21, the year of the Covid pandemic, when the government raised Tk 42,000 crore.

Bankers attribute the decline in NSC investments to a reduction in interest rates by 1-2 percent on all savings certificates in September 2021.

Additionally, the introduction of a maximum limit and the mandatory inclusion of national identification documents during the purchase of savings certificates have further exacerbated the decline.

The Bangladesh Bank has also mandated the submission of proof of the previous year’s income tax returns for investments in savings certificates worth more than Tk 5 lakh.