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Cut in NSS profit rates not applicable to old investments: CDNS - Naveed Yaseen - 04-15-2009 08:42 AM
LAHORE (April 15 2009): The cut in the profits rates on various national savings schemes by 1.33 percent with effect from April 1, 2009 will not be applicable to the old investments and the current account-holders will continue to get their monthly profits as per previous rates, a regional officer of the Central Directorate of National Savings (CDNS) told Business Recorder here on Tuesday.
He confirmed that the government had lowered the profit rates of saving schemes by 1.33 percent, slashed from 14.53 percent to 13.20 percent. The rates on five-year maturity regular income certificates have been cut to 13.60 percent from the previous 15 percent. The interest rates on Bahbood savings certificates, meant for widows, pensioners and senior citizens have been reduced to 16.1 from 16.8 percent.
Now the holders of Bahbood certificates will get Rs 1, 362 instead of Rs 1,400 on an investment of Rs 100,000 as monthly profit. The experts told Business Recorder that decrease in the NSS profits would discourage the saving culture and add to economic woes of the inflation-hit lower income groups and pensioners.
It may be added that investment in national savings schemes (NSS) saw a big jump during January due to two percent increases in interest rates on different products effected by the government in July, October and December 2008.
According to official figures, the government managed to raise Rs 25.96 billion in January, which was the highest amount raised in a month during the current financial year. The previous highest amount was Rs 11.79 billion in October and the government looks set to achieve its target of raising Rs 150 billion set for the full year.
Last year, the Central Directorate of National Savings had raised Rs 87 billion, surpassing the revised target of Rs 80 billion. One economist opined that the major reason for lowering the NSS interest rates was to shift the NSS investment to banks as for the first time in many years, banks had come under real pressure to give a fair deal to their depositors and enhance deposit rates. "The banking system was facing stiff competition from national saving schemes for the NSS rates had made the saving schemes more attractive for individuals and those institutions that are allowed to invest in the NSS," he added.
Another financial expert said that the stock market would welcome the lowering of bank and NSS interest rates as the investors would bring their money from the banks and the NSS to the stock market, which had made remarkable recovery during the first fortnight of this month. It may be added that the NSS is the biggest non-bank borrowing institution for the government with over six million account-holders, investing more than Rs 1,500 billion.
http://www.brecorder.com/index.php?id=24903