Govt to increase profit rates up to 1.5pc on NSS

[LRE]

Govt to increase profit rates up to 1.5pc on NSS



Wednesday, September 24, 2008
By Mehtab Haider

ISLAMABAD: The federal government has approved to jack up profit rates up to 1.5 per cent on various products offered by the National Savings Schemes (NSS) in order to lure investments and to give incentives to inflation-stricken low income segments especially pensioners and widows.

“Yes, Finance Ministry has approved to increase interest rates on various products of the NSS up to 1.5 per cent and the new rates will become effective from October 1, 2008,” a high-level official in Finance Ministry confirmed while talking to The News.

The interest rate on Defense Savings Certificate has been increased to around 11 per cent from 10.15 per cent, special savings certificate rates went up to 10.50 per cent from 9.25 per cent, regular income certificate increased to 11 per cent from 9.54 per cent and savings account increased to 10 per cent from 8.5 per cent.

The interest rates on Behbood savings certificate and pensioners benefit account have been increased from 13.56 per cent to around 15 per cent. “We have approved surge of interest rates on schemes offered under the NSS,” Secretary Finance Dr Waqar Masood told The News few days back before leaving for New York with President Zardari for attending UN general assembly session.

When this scribe contacted DG Central Directorate of National Savings (CDNS) Zafar Sheikh, he said the Finance Ministry has approved a summary for increasing rates on various products offered under the NSS, which would become effective from October 1, 2008. He concluded that they are still working on new rates and exact details will be shared after few days.

However, the sources said the increased rates will be applied on new investments only while the existing investors will not be able to get benefits of this increase. The government had announced a surge of two per cent on profit rates of various schemes of NSS from July 1, 2008.

So it will be second increase within three months period by jacking them up from 1 per cent to 1.5 per cent. The government is scaling up interest rates on NSS in order to remove anomaly which will pave the way for attracting more investments.

There must be linkage between rates on PIBs and other products and there was need to edge up rates on NSS keeping in view movement of interest rates in recent months. There are six million clients of CDNS who have invested in various products offered by the NSS with portfolio investments of Rs1.2 trillion.

The government has envisaged target for the CDNS to generate Rs150 billion to support budgetary side for 2008-09, said the sources.

The government wants to decrease its reliance on borrowing from the State Bank of Pakistan, which touched its new heights during the last financial. The government is making plans to launch the government commercial paper, PIBs and making investments in the NSS as more attractive for generating revenues from these avenues, which will reduce its reliance on borrowing from the central bank. For the outgoing fiscal year, the CDNS provided Rs78 billion to the government against the set target of Rs80 billion for 2007-08.

There are new schemes in the pipeline such as Shariah compliance paper but they require prior approval of the Finance Ministry, which they have not got so far despite making desperate efforts. The corportization plan envisaged by the government is facing delays and it will create difficulties for the CDNS to achieve the desired results when they have to see towards the Finance Ministry for seeking approval on each and every move.


http://www.thenews.com.pk/daily_detail.asp?id=137542