KARACHI, March 12: The Central Directorate of National Savings (CDNS) would be turned into a professional body to serve as a window for investment of funds in equity and bond markets by the public sector corporations.

Restructured as an autonomous body, the CDNS will have professional asset fund managers, who would manage investments by public sector corporations which currently lack the skills to venture into the capital market, an official of the ministry of finance said.

Speaking at the launching of the Mutual Funds by Arif Habib Investments here on Friday Finance Minister Shaukat Aziz said that he would turn the CDNS into a professional organization that “would promote the interest of the financial markets as opposed to being an outfit that creates distortion in the market.”

The government is also working on a proposal for floating of private companies that would manage pension funds and investment. Among the various initiatives under consideration of the government, is the placement of pension funds into new schemes to be launched by the CDNS.

The agenda for integration of the financial market includes current pricing of long-term NSS instruments on the basis of market rates to be determined by the auction of long-term investment bonds. Institutional investors have been debarred from investing in national savings schemes, but these can invest in long-term investment bonds.

Sources said that the return on national saving schemes was expected to be reduced further from next fiscal as the rate of inflation was stated to have fallen to 2.6 per cent and lending and bank deposit rates were also being cut accordingly.

Officials admit that it may not be possible for the government to bring about a sizable reduction in borrowing needs, but it’s adverse effects are intended to be minimized by what is described as rationalization of national saving schemes that means further reduction in return on NSS.

The NSS also compete with the returns on bank deposits and equity and bond markets and deprive them of the investment funds that flows into the NSS.

The government is now taking a number of initiatives to develop the capital market with the objective that it would not be dominated by a few players or would have a narrow base of investments. The NSS is, therefore, being integrated into the financial market.