KARACHI, Jan 28: The directorate of National Savings, which was expected to revise rates on its schemes in the first week of January, has neither notified the change, nor bothered to explain the delay in the decision eagerly awaited by investors. Many middle income people, specially retired persons and senior citizens were hoping for higher returns in the wake of increased inflation.

Though the interest rates on saving schemes were not raised, the rate of penalty on early withdrawals has been reduced. The benefit of reduction of service charges, however, is estimated to be rather insignificant for most people, who invested their life-time savings in the NSS.

Service charges on regular income certificates, Behbood savings certificates and Pensioners’ Benefit Account have been reduced through a notification on last Wednesday. The Service charge is deducted on encashment before maturity of certificates and schemes.

Market experts said that the benefit of reduction of service charges is simply ignorable as the reduction has been made on the schemes, which belong to widows and pensioners who solely depend on the income of their investment. They hardly opt for withdrawal of their money before maturity.

The government had introduced the pension scheme and Behbood scheme as a favour to the senior citizens to compensate them for the drastic reduction in the profit of national savings schemes.

The profit on the scheme was fixed as 11.4 per cent, however, the income was taxable and 10 per cent withholding tax is deducted on the profits.

The NSS rates are generally announced after six months. Analysts said that the rates could not be changed because of prevailing interest rate situation which did not allow the NSS to increase its rates.

The government wants to keep inflation within 8 per cent, while at the same time, it does not want to increase return on NSS that might tilt the flow of liquidity towards the scheme.

Experts said the government was not willing to borrow through the NSS as it could borrow at much lower rates from the banking system. This discouragement resulted in massive outflow from the scheme, especially in the second half of the previous fiscal which ended on June 30, 2005.

The data showed that over Rs43 billion slipped away from the scheme from February to July 2005. The heavy withdrawals accelerated in the second half of the fiscal 2005, but it had started with the beginning of the year. Experts said that the main reason was the unexpected sharp increase in the inflation which was almost double in 2005 compared to 2004.

The first four months of the current fiscal 2005-06, showed massive increase in the deposits of Behbood and Pensioners’ schemes. From July-October, the stocks of Behbood scheme reached Rs110 billion with an addition of Rs26.7 billion during the period. The Pensioners’ deposits rose by Rs7.839 billion to make the total stocks as Rs48.955 billion during the same period.

This reflects the dependency of old and retired citizens on the scheme. The interest rates, which touched historically low levels up to 1.5 and 2 percent during 2004-05, provided reason to the government for slashing of interest rates, but after rise in inflation the rates were not increased.

The plight of old citizens does not end here. The crude process of dealing with the old citizens at the NSS centres is yet another pain, which could be witnessed at all centres.

The government has borrowed about Rs850 billion through these schemes but the process of return to the lenders is like providing donations to the old people. Every day hundreds of old citizens come to the NSS centres and spend hours to get their own money. Even those who are sick, weak and old enough to walk, have to wait for the payment of returns.

The authorities have been announcing for years that automation is under process which would facilitate the people but still there is no sign of automation.

“We have no choice but to come here and spend our time which is not required by this nation. It looks that we are not part of this society. Our services have been ignored and we are left to wait for a painful,” complained a retired officer of the Post Office, Saleem Abbas. He was waiting for three hours to get profits on his life-time investment at the Gulshan-e-Iqbal NSS centre.