ISLAMABAD, July 5: The government has decided in principle to increase interest rates on saving schemes and convert the Central Directorate of National Savings (CDNS) into an autonomous body.

Informed sources told Dawn here on Tuesday the government had been proposed to accept a minimum 12 per cent rate of return on all saving schemes by following the pattern of the United Bank Limited (UBL).

Currently, the maximum rate of interest is 8.15 per cent being offered on defence saving certificates which is considerably low to attract savings in the country.

The sources said that since Pakistan was no longer getting any IMF financial assistance, which used to come with strings attached, the government contemplated increasing interest rates on the saving schemes.

A couple of high-level meetings were held recently to discuss and decide the issue. However, the matter will remain pending until the return of Prime Minister Shaukat Aziz from his foreign tour.

The government attracted gross savings worth Rs300 billion during 2004-05, Rs30 less than a year earlier.

The reduction in savings was due to low interest rates as well as the government’s decision to sell savings schemes only through the branches of CDNS. Previously the commercial banks also sold the directorate’s various saving instruments.

The prime minister was reported to be in favour of extending increased interest rates on saving schemes instead of announcing a one-time relief to investors. In this behalf, a certain mechanism was being finalized by the people concerned.

About the conversion of CDNS into an autonomous body, the views of the State Bank of Pakistan (SBP) and the Securities and Exchange Commission of Pakistan (SECP) were currently being sought to avoid any ambiguity.

The government wanted to promote savings as CDNS still enjoyed credibility and had a portfolio of over Rs1 trillion.

The government planned to convert the CDNS into some kind of an authority to enlarge its functions and adequately benefit its employees.

The affairs of the proposed autonomous body were likely to be supervised by a Board of Directors, to be headed by the federal secretary of finance with secretaries of establishment, Economic Affairs Division (EAD), deputy governor of SBP, additional secretary budget of the ministry of finance and one ex-banker of national repute being its members.

At present, the CDNS is marketing only government securities through a network of some 367 branches. With significant reduction in return on fixed securities, brought about by market conditions, small savers were feeling frustrated as they had no access to securities which offered better return.

Under the proposed programme, there will be an upgradation of all the national saving centres across Pakistan through a detailed automation programme. The number of transactions have increased manifold that warranted automation as it was becoming increasingly difficult to achieve the desired results through manual handling of things.