Hidden charges attached with various products offered by commercial banks, lack of trust in some of commercial banks after privatisation and discouraging attitude of the banks towards small investors made the National Saving Schemes (NSS) a preferred investment zone that helped the Central Directorate of National Savings (CDNS) exceed the revised saving target of Rs 80 billion for the last fiscal year.
The banks do not offer what they made public through advertisements in print and electronic media. There are always hidden charges attached to the banks' saving schemes. On top of it, the NSS enjoys full government guarantee that attracts investors, Business Recorder has learnt through interviews with investors and officials in CDNS and banks.
Recently the CDNS revised the rates of return on savings schemes to achieve Rs 150 billion saving target for 2008-09. The new CDNS rates were increased from 10.15 per cent to 12.15 per cent on Defence Savings Certificates, from 9.25 per cent to 10.25 per cent on Special Savings Certificate, from 9.54 per cent to 11.52 per cent on Regular Income Certificate, from 11.64 per cent to 13.56 per cent on Behbood Savings Certificate and Pensioners Benefit Account, from 9.25 per cent to 10.25 on Special Savings Account and 6.5 per cent to 8.5 per cent on Savings Account. These rates have taken effect from June 24th. An official of the CDNS said that the new rates will benefit only the new investors.
"We have been given a target of Rs 150 billion of non bank borrowing during the current fiscal year," said the official. Rupees 80 billion target for the last fiscal year has been surpassed despite the fact that old return rates had been in place for the last seven years, the official said.
We are expecting that total borrowing will touch Rs 85 billion when the figures for the last fiscal year will be finalised in a few days. He admitted that real interest rates on Pensioners Benefit Account and Behbood Savings Certificates, which are 10-year term deposits, are around 2.45 per cent if we included the inflation of 11.11 per cent recorded during first 11 months of the last fiscal year.
If the saving of depositors kept their money with themselves, then the inflation erodes their principal amount. A senior bank official said that interest rates of CDNS might have attracted more and more individual depositors. With the inflation rates going at over 11 percent, most of the banks offer almost nothing to depositors.
The banks' mainstay revolves around corporate sector, he added. Most of the banks offer 5 per cent interest rate to depositors irrespective of slabs. In term deposits the rate of return varies between 4 and 9 per cent. He said that the banks were about to announce new rate of return this month. He said that a few banks have recently started announcing some interest rates.
Officials at the CDNS said that the original target for the last fiscal year was Rs 43 billion. The target was revised upward to Rs 80 billion as the government was in dire need of more non-bank borrowing. The National Savings is biggest non-bank borrowing institution for the government and it has deposits of more than Rs 1200 billion at present having more than 6 million investors.
He said that unlike banks, the National Savings welcomes the small investors. "At the NSS, I feel completely secured. At the age of over 70 years, I cannot afford to lose my money by depositing my saving in a commercial bank whose policies are frequently changing, mostly twice a year," said Sarfraz Ahmad, a retired government employee.
In the past, some commercial banks were hit by scandals and even bankruptcy, resulting in ultimate loss of money of small depositors, said Sarfraz while standing in front of CDNS office in Melody Market.
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