In an exclusive interview with Business Recorder team comprising Wasim Iqbal, Sohail Sarfraz and Asma Razaq Central Directorate of National Savings (CDNS), Zafar M. Sheikh admits that the process of implementing the CDNS restructuring plan is slow. He further unveiled new products under consideration by the Ministry of Finance: short terms saving certificates and expansion of saving network to overseas Pakistanis. The following are excerpts from the interview:
BR: Why was it considered appropriate to ban institutional savings in CDNS? ZMS: Economic Co-ordination Committee (ECC) took this decision because of concern that institutional buying may retard the growth process. This decision led to a revised Rs 186 billion target from the earlier target of Rs 223 billion. However investments by individual funds like pension, gratuity, superannuation, contributory provident fund and trusts remain unaffected.
BR: Are there any pending issues with FBR?
ZMS: CDNS is regularly deducting withholding tax on profit earned through various saving schemes. The deducted amount is duly deposited in the national kitty. However, withholding tax is not deducted on those schemes that are exempted from income tax under Income Tax Ordinance 2001. CDNS extends full co-operation to FBR as far as withholding tax audit of CDNS is concerned.
BR: Any new products that may be launched anytime soon?
ZMS: Two important schemes are in the pipeline for the current fiscal year. The Ministry of Finance is considering issuance of three types of Short Term Saving Certificates. Its objective is to encourage small savers who can afford to deposit their money for short periods of time: a few months like 3, 6 or 12 months.
CDNS is also considering expanding the national savings' network to non-resident Pakistanis (NRPs) who will be able to invest online in any scheme of National Savings through CDNS website. The rates of return will be the same as offered to resident Pakistanis. There is an exchange risk but the rate of return is very high compared to what is on offer in other countries today and, more importantly, this scheme would enable the NRPs to invest in their own country.
The National Savings Bonds trading in the country's three stock exchanges would be further promoted.
BR: Why is there a delay in the restructuring of CDNS?
ZMS: Six months ago the Cabinet agreed to convert CDNS into an autonomous government corporation subsequent to getting the views of relevant ministries.
The National Saving Bill will empower the CDNS to take quick decisions on certain issues. Secretary for Finance will be the chairman of the board of the autonomous organisation and its members would be from the public as well as the private sector.
BR: The government is the largest single borrower of CDNS? Any comments?
ZMS: Government does not want to fuel inflationary pressures in the economy by relying too much on bank borrowing therefore its only option is to resort to domestic non-bank borrowing from the CDNS, to finance its budget deficit. CDNS is fulfilling its social responsibility by giving special rates to some members of society like pensioners and widows for their welfare.
BR: What is the CDNS budget?
ZMS: CDNS understands the government's financial constraints. Our main objective is to computerise all 386 branches of National Savings. This is subject to availability of funds.
Around 89 branches of NSO have so far been automated. All branches in Faisalabad have been automated. The next step is the installation of ATN machines at these branches. Our next goal is to automate the branches in Abbottabad and Peshawar region.
BR: How do you rate CDNS performance?
ZMS: CDNS has mobilised around Rs 800 billion during the past three years and its estimated portfolio at end March 2011 was Rs 1.830 trillion. CDNS achieved this sum with limited staff and outdated technical support and practices. The number of clients has crossed 6 million mark. The national savings offices have been renovated along with customer support centers. CDNS staff realises that they are not only government servants but public servants as well.
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