August 2, 2003	Saturday	Jumadi-us-Sani 3, 1424

KARACHI, Aug 1: The government attracted Rs8.6 billion through pensioners benefit accounts tailored for retired people within first five months after their launching on January 20, 2003 i.e. up to May 2003. The 10-year scheme was launched with an annual profit of 11.04 per cent subject to six-monthly revision like all other national saving schemes.

Officials of Central Directorate for National Savings (CDNS) say that the amount of money generated through these accounts must have crossed the target of Rs9 billion. Figures relating to inflows in pensioner accounts are being finalized.

The officials say the inclusion of widows under the cover of the pensioners benefit scheme renamed as Bahbood Saving Certificates from July 1 has made the scheme more popular. That is why the government believes it can raise up to Rs22 billion through this scheme in the current fiscal year. The officials say the lowering of the return on pensioners benefit scheme on July 1 in line with the overall reduction in profits on national saving schemes would not make this target harder to achieve. Because with the declining rates of return on bank deposits and with not many investment avenues open for small savers the rate of return on Bahbood Saving Certificates is quite lucrative.

From July 1 the government had slashed the rate of return on pensioners benefit accounts from 11.04 to 10.08 per cent—and it also fixed 10.08 per cent return on Bahbood Saving Certificates launched for widows exclusively.

But this 96 basis points cut was the lowest compared with the rate-cuts announced on other national saving schemes: the rate of return was lowered from 10.03 per cent to 8.50 per cent on defence saving certificates; from 9.12 per cent to 7.68 per cent on regular income certificates; from 8.67 per cent to 7.67 per cent on special saving certificates and from 5 per cent to 4 per cent on saving accounts.

That is why Bahbood Saving Certificates or pensioners benefit accounts as called earlier are doing roaring business and are set to raise more money than projected from the eligible investors.

Senior bankers and officials of CDNS say the low interest rate environment in the country has helped national saving schemes maintain their charm even after the July 1 rate-cuts. The CDNS officials say almost all national saving schemes continue to attract sizable investment—notably defence saving certificates. But they say the figures relating to the investment generated in NSS in June and July are being compiled. In May 2003 investment in national saving schemes stood at Rs20 billion—almost double the amount generated in May 2003.

One of the reasons for the NSS still being lucrative despite successive rate-cuts after every six months is that the rates of return on bank deposits have been at their historical lows. At end-May 2003 weighted average rate of return on bank deposits fell to a record low of 2.41 per cent more than one per cent below consumer inflation.

Senior bankers say they have to lower the deposit rate to make room for offering bank finances at cheaper rates amidst rising liquidity in the system. Weighted average lending rate of all banks combined stood at 7.09 per cent at end-May 2003. Thus the gap between the lending and deposit rates of banks was at 4.68 percentage points significantly lower than what it was eleven months ago. In July 2002 the gap stood at 8.15 per cent with the average lending and deposit rates at 12.17 per cent and 4.02 per cent.