July 17, 2006	Monday	Jumadi-ul-Sani 20, 1427

THE Central Directorate of National Savings (CDNS) with an overall portfolio of over Rs1 trillion, is likely to be converted into “Pakistan Savings” soon. The restructuring of the CDNS has been on the government agenda for quite sometime now.

Officials say that Pakistan Savings will function like an independent body with its board of directors and introduce new products like funding of education, housing ad marriages.

The CDNS now also looks inclined to provide better options for institutional and foreign investment beside consolidating its various existing schemes to boost savings.

National savings as percentage of GDP stood at 16.4 per cent in 2005-06, lower than last year’s level of 16.5 per cent. Similarly, domestic savings stood at 14.4 per cent of GDP in 2005-06, slightly lower than 14.5 per cent of GDP last year.

These savings need to be increased by offering more attractive products to people- both in and outside the country. The concerned officials do not believe that there should be any worry as things are gradually improving and the investors are being offered returns at competitive rates.

These officials claim that investment trend is “very good” as there has been over 22 per cent increase in savings in just three weeks after their rates were improved recently.

How competitive are the rates of various National Saving Schemes? The offered rate, the concerned official say, may be less than the borrowing through PIPB or treasury bills (TBs) of similar maturity. But in terms of effective rates, like pre- mature encasement, the government remains beneficial.

Then sales of NSS are no more restricted to CDNS as all the banks have been permitted to do the business on behalf of the CDNS. The CDNS has issued stocks to the banks and thousands of their branches are doing this business on behalf of the CDNS. Earlier, the sales were restricted to its 367 branches. “So the impact is very good”, a concerned official said.

About the increase in its number of branches, he said, the CDNS was more concerned about its present system which needed to be consolidated and upgraded. “Once that objective is achieved only then we will think about expanding our network. The CDNS is much more economical to the government to raise funds compared to banks and post offices”.

What are the various option for CDNS in future. One of them is going into mutual fund business. The CDNS plans to offer its stock starting from fixed income product.

The directorate is not currently entertaining the institutional investors. It is only entertaining the primary dealers but in this process the rest of other investors are stuck up because they do not have any choice. “And since PPIB and TBs are not acceptable to all, we would like to exploit this situation. We would like to offer a product for all the government institutions”, the official said.

Foreign investment: the CDNS is believed to have done a good business in UAE recently. This has led to more planning for selling various NSS certificates in other Middle Eastern countries.

“The initial response is very good, therefore we have decided to explore other markets in the Middle East”, another concerned official said.

The government has already restored the agency functions of all the authorized banks to sell savings certificates because of difficulties being faced by the people.

In this behalf all, the existing certificates, issued by the banks on or after 15/6/2003 which were discontinued after the suspension of the agency functions of the banks, could now avail the facility of reinvestment benefits till maturity or encasement, whichever is earlier provided for the rules.

This decision was taken particularly to benefit a large number of people living abroad who could not visit their banks in Pakistan on the specific dates after the discontinuation of agency functions of the banks.

It is said that the ministry of finance would soon be placing a draft before the federal cabinet to convert the CDNS into an autonomous “Pakistan Savings”. The prime minister has, in principle, agreed to have this Pakistan Savings to help promote its business and to add more functions into it.

In this behalf, the government is considering to allow the proposed Pakistan Savings to go into the Mutual Funds business and also work like other Financial Development Institutions (DFIs).

A number of multi-dimensional targets and goals are currently being finalised which will be undertaken in next six months after the approval of the Pakistan Savings first by the cabinet and then by the parliament.

Simultaneously, the restructuring of the organization will be started to make it more efficient and service oriented. It would allow the concerned officials to also induct new people in the organisation on better salary packages.

Pakistan Savings will function like an independent body by having its own board of directors.

Presently, the CDNS is marketing only government securities through a network of some 320 branches. With significant reduction in return on fixed securities, brought about by the market conditions, small savers are feeling frustrated as they have no access to those securities that offer 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 is becoming increasingly difficult to achieve desired results through manual handling of things.

The CDNS, whose portfolio has increased to over Rs1 trillion along with four million plus clients, will enjoy the considerable financial autonomy after becoming Pakistan Savings.

The CDNS, which was fulfilling the requirement of deposit banking functions, is expected to have its pay scales revised upward with a view to offer good salary packages to the employees after it becomes Pakistan Savings.

The proposed Mutual Fund will be managed by professional assets management companies having a private sector management. This mutual fund will be a subsidiary of Pakistan Savings for which the government will initially provide the equity.

The proposed Pakistan Savings is expected to diversify its business and play an important role in resource mobilization and increasing the availability of domestic resources for investment.

The ongoing pensioners and welfare schemes of the organisation are also likely to be further improved once the CDNS is converted into Pakistan Savings.

About 25 per cent of the total portfolio of the CDNS belonging to institutional investment including banks, has been rapid due to which there is some drop in the net portfolio.