ISLAMABAD: Amid higher policy and reduced secondary market coupon rates, the Central Directorate of National Savings (CDNS) on Friday slashed profit rates on all national savings schemes, but increased these on savings bank accounts and short-term savings certificates.

The new rates would be applicable to deposits and investments made with effect from February 4. The State Bank of Pakistan had increased its discount rate by one per cent to 9.75pc on December 14, 2021, and kept it unchanged on January 24 this year.

The returns on savings accounts and certificates are linked with the central bank’s policy rate and are normally kept slightly higher to ensure better returns to small savers without drastically affecting the government budget. The government has been increasing profits on savings schemes since May last year.

Rates on savings bank accounts, short-term certificates increased

According to a series of notifications issued by the Ministry of Finance, the CDNS has slashed the profit rate on Defence Savings Certificate (DSC) to 10.40pc from 11.12pc fixed on December 10, 2021, showing a reduction of 72 basis points (bps). It stood at 9.29pc in May last year.

Likewise, the returns on Behbood Savings Certificate (BSC) and Shuhadas Family Welfare Account were reduced to 12.40pc from 12.96pc, down 56bps. The return on Regular Income Certificate (RIC) was reduced to 10.32pc of total investment from 10.80pc, down 48pbs.

The returns on Special Savings Certificate (SSC) and Special Savings Account (six-month to 30-month tenor) were slashed to 10pc from 10.40pc, showing a reduction of 40bps. The return on three-year Special Savings Account was reduced by 20bps to 11.40pc from 11.60pc.

On the other hand, the return on Savings Bank Account (SBA) has been increased to 8.25pc from 7.25pc, up 100bps. Likewise, the return on Short-Term Savings Certificate (STSC) was increased to 9.68pc and that on three- and six-month tenors to 10.12pc from 9.24pc and 9.66pc, respectively, showing a reduction of 44bps and 46bps. However, the return on one-year STSC was slightly reduced to 10.20pc from 10.26pc, down 6bps.

The CDNS has dispatched the revised rate sheets to all regional offices with instructions that the existing stock of blank special savings, regular income and defence savings certificates would now be used by affixing rubber stamps with Issue57, Issue63 and Issue58, respectively, along with the revised rates before issuance.

Officials said the profit rates were revised even though the central bank had increased its policy rate by 125bps after the last revision in saving rates (from 8.5pc to 9.75pc) on December 14 last year. There were, however, some reductions in government papers.

The rates of national savings schemes are announced after every two months and are linked with cut-off yield of long-term Pakistan Investment Bonds. As of last auction a few days ago (January 27), the returns on three-year and 10-year PIBs range between 10.79pc and 10.97pc, respectively, compared to 11.5pc and 11.76pc in December 2021.

An official said the rates had been revised downward due to the declining trend in secondary market yields on long-term PIBs and treasury bills.

Published in Dawn, February 5th, 2022