The government has set a Tk 6 million investment limit for government-offered savings schemes in a bid to curb sales. As part of the initiatives to stamp out illegal sales of savings certificates, tax identification number (TIN) and bank accounts have been made mandatory. Moreover, tax at source has been increased to 10 percent instead of five.
The move, initiated to stamp out illegal money, has been met with mixed reactions. Private research organisation, Centre for Policy Dialogue (CPD) Fellow Professor Mostafizur Rahman lauded the government’s initiative. “Anyone can invest Tk 6 million in savings certificates,” he said before adding that limited income buyers aren’t having problems with it. Rahman said that making bank accounts and TIN mandatory is causing problems for those who used to invest huge amount of illegal money.
“Since black money was invested in savings certificates, the government spent more in interests,” he said. He is of the view that the national identification numbers of the investors should be checked to see that there are many who are under multiple schemes. Meanwhile, a buyer Ranjit Sarker said that many are now unable to purchase savings certificates as TIN numbers have been made compulsory.
A top level employee of the National Savings Directorate said that the governments initiative wasn’t to curb the profits of middle-income people but to stamp out the black money and unrestrained profits from them. Owing to the several steps taken by the government, the sale of savings certificate went down within the first month of the 2019-20 fiscal.
According to the National Savings Directorate in July of this year Tk 1.6 billion worth of savings-certificates were sold which was well over Tk 50 billion in July of 2018. A large number of people were encouraged to deposit in savings certificate owing to the disparity between the interest in bank deposit and savings certificates.
As a result, the government at the behest of bank owners undertook several initiatives to discourage investments into the certificates. One such move was hiking up the tax deducted at source from 5 percent to 10 percent on certificates worth over Tk 500,000. Moreover, a bank account and Tax Identification Number (TIN) were made compulsory for the purchase of a savings certificate in a bid to prevent the same person from purchasing certificates from more than one place.
The steps have helped deposits to increase in the banks. According to Bangladesh Bank sources, in the last three months between April to June deposits increased to over Tk 607 billion. Every year the government takes loans of two types to make up for the budget deficit. One is foreign loans and the other is internal source that is from banks and savings certificate sector.
The government has a target of borrowing Tk 770 billion amongst which Tk 270 billion is targeted to come from savings certificate. During the 2018-19 fiscal the government planned to borrow over Tk 260 billion from the DNS but ended up loaning double the amount with nearly Tk 500 billion.
Prior to cutting down interests by two percent against savings certificates in 2015, the investors used to get profit of 13 percent. Currently the DNS has four kinds of savings certificates five-year family, 11.52%, five-year Bangladesh, 11.28%, profit-based (3 month interval) 11.04%, five-year pension, 11.76%.
