ISLAMABAD, April 10: The government has linked the expected one per cent increase in the interest rates on all national savings schemes and the conversion of the Central Directorate of National Savings (CDNS) into an autonomous body, the Pakistan Savings (PS), with the 2007-8 budget to be announced in June this year.
Sources in the ministry of finance told Dawn on Tuesday that the officials concerned have also proposed to the higher authorities to introduce new savings products in the coming budget.
Prime Minister's Adviser on Finance Salman Shah has asked the concerned finance ministry officials to expedite the issues concerning the conversion of CDNS into PS, introduction of new products and offering of additional one percent benefit to all depositors, sources said.
However, most of the commercial banks were opposing the proposal of CDNS authorities to offer the one percent increase. These banks were reportedly being supported by some officials in the finance ministry who said that in the fast changing business environment, banks will face problems if any increase in the interest rate was allowed. “Commercial banks are also being supported by the central bank,” a source said, adding that if CDNS was to remain in business, it should not be stopped from announcing certain increases in interest payments.
Dr Salman Shah last month had given a final “go-ahead” for the conversion of CDNS into PS with a view to enlarge its functions and offer increased salaries to its employees. The complete restructuring of CDNS has been proposed to be completed by June 30. Prime Minister Shaukat Aziz had also given in principle the approval to establish PS 15 months ago, but no decision was taken to this date due to one reason or the other.
Sources said that once the CDNS was converted into an autonomous body, its affairs would be supervised by a board of directors headed by the secretary finance, and have members, including the Economic Affairs Division, deputy governor State Bank of Pakistan, additional secretary budget of the ministry of finance and one ex-banker of national repute. Under the proposed restructuring programme, all national saving centres across Pakistan would be upgraded through an automation programme.
A decision has also been taken to launch a mutual fund that would be managed by professional asset management companies.
PS is expected to play an important role in resource mobilization, increasing the availability of domestic investment, introducing new products such as offering funds for education, housing and marriages, the sources added.
