KARACHI: The government on Friday announced reduction in profit rates for national savings schemes with immediate effect in line with cuts in the benchmark interest rates
Profit rate on pensioners benefit account was slashed to 10.32% per annum compared to 12.24% earlier. The profit payable on the deposits made in the savings bank accounts where withdrawals are made through other than cheques was fixed at 7% per annum.
Profit rate on monthly balances maintained in the family welfare accounts of martyrs was set at 10.32% per annum. The new rates were applicable from April 24, 2020.
Shaikh approves new profit rates
Adviser to Prime Minister on Finance and Revenue Hafeez Shaikh approved the new profit rates for special savings, regular income, Bahbood savings, defence saving certificates and special savings accounts, official documents showed.
The Central Directorate of National Savings was tasked to mobilise Rs352 billion in savings during the current fiscal year, as opposed to the actual collection of Rs410 billion in the last fiscal year.
In the first seven months, the directorate managed to collect Rs116 billion. The rate cut is believed to dent the revenue collection in the remaining months of FY2020.
The official document showed that profit for special saving certificate of Rs100,000 denomination was set at Rs4,000 for the first two and half years and would increase to Rs4,300 for the sixth half year.
“In case the profit earned on or after the 1st February, 1992 on special savings certificates is not drawn on due date, the undrawn profit will automatically stand invested with effect from the date of accrual,” a document said.
Regular income certificate with Rs100,000 denomination bears profit of Rs690 per month. Profits payable on the deposits made in special savings accounts are 8% per annum for each of the first five periods of completed six months and 8.6% per annum for the last period of completed six months.
Likewise, Rs100,000 of investment in a defence saving certificate would increase to Rs104,000 in one year and Rs227,000 in 10 years. Bahbood savings certificate of Rs100,000 denomination draws profit of Rs860 per month.
‘Lower returns to help equity market’
Analysts said lower returns on the government securities and investment schemes would help equity market attract investment from local sources.
“Significant decline in secondary market yields in the last few months followed by cut in profit rates on national saving schemes makes investment in equities even more attractive,” an analyst said.
The central bank’s latest date showed that the national debt market of saving schemes and prize bonds exceeded Rs3.99 trillion up to November 2019. Of total debt market, the contribution of bearer prize bonds was around Rs720.57 billion.