ISLAMABAD: After the central bank hiked its policy rate to a massive 21pc and following a historic surge in secondary market coupons, the Central Directorate of National Savings (CDNS) on Friday increased profit rates on all national savings schemes by significant margins.

The new rates will apply to deposits and investments made with effect from April 10. The rates, the highest in more than a decade, have been increased after the State Bank of Pakistan raised its key interest rate and yields on Treasury bills jumped to around 22pc earlier this week.

The returns on saving accounts and certificates are linked with the central bank’s policy rates and are normally kept slightly higher to ensure better returns to small savers without drastically affecting the government budget.

However, the government is paying over 21pc returns to secondary market players in investment bonds and Treasury bills but still paying lower returns to its own citizens.

According to a series of notifications issued by the Ministry of Finance on Friday, the CDNS has increased the profit rate on the Defence Saving Certificates by 261 basis points to 14.87pc. The rate was 9.29pc in May last year.

Likewise, the returns on Behbood Savings Certificates, Pensioners’ Benefit Accounts and Shuhada Family Welfare Accounts have been raised by 264 bps to 16.56pc.

The return on Regular Income Certificates has been raised to 12.84pc of total investment, an increase of 24 bps.

The profit margin on the three-year Special Saving Certificates and Special Savings Account was increased by over 400 bps to 17pc for the first five profits and to 17.8pc for the sixth profit. The average return for this category now stands at 17.13pc compared to 13.1pc previously.

The return on Saving Accounts (running accounts) has been increased by 400 bps to 18.5pc.

On the other hand, the return on Short-Term Savings Certificate has been raised to 19.92pc, 19.64pc and 19.82pc for three-, six- and 12-month tenors, respectively, after an increase of about 380, 364 and 386 bps.

The CDNS has dispatched the revised rate sheets to all the regional offices with instructions that the existing stock of blank special savings certificates, regular income certificates and defence saving certificates would now be issued at new rates from April 10.

The rates of national savings schemes are announced every two months and are linked to cut-off yields of long-term Pakistan Investment Bonds. As of the previous auction last week, the return on three-year and 10-year PIBs ranged above 21pc.

Published in Dawn, April 8th, 2023