The Government is contemplating increase in mark up rate of all national saving schemes (NSS) in the upcoming budget to make them attractive for investment, sources confirmed to Business Recorder here on Monday. Special package is in the pipeline in case of widows whose livelihood solely depends upon the assets left behind by his husband.
Similarly, old age benefits will be further enhanced and the rates of return on such schemes for people above 60 year of age will be over and above the other categories. This incentive package in form of increase in mark up rates will be helpful in attracting public savings as they were no more interested to put their money in banks or such schemes, reason being that few years back the interest rate was decreased to a level where salaried class and pensioners were no more interested to invest.
This package in the upcoming budget will attract all such savings, while is essential to increase as government is in dire need of resources to meet development and non-development expenditure. In the past national and defence saving schemes were offering lucrative rate of return and provided huge financial investment to government institutions.
Sources said that a major function of the NSS is to generate funds for the financing of budget deficits with a concomitant mobilisation of savings in the economy. NSS meets financial investment needs of various investors including pensioners and small savers of lower income groups, particularly the fixed income group.
Accordingly, CDNS is offering various non-tradable Savings Certificates/Schemes with different maturity profiles ranging from 3 to 10 years. Some of these schemes were specifically designed to meet the requirements of pensioners, widows, orphans etc and only individuals are eligible to invest in these schemes.
The profit rates on NSS were administratively controlled in the past and were subject to discretionary changes. In other words, there was no established market mechanism for determination of these rates.
Sources said that the NSS provide much-needed funds to the government for the financing of its budgetary gap. The limited ability of the government borrowing from abroad, and at times ceilings on the government borrowing from the banking system, forced the government to resort to financing of deficit through NSS. In this backdrop, it is quite clear that NSS receipts may play a vital role in bridging the resource gap.