KARACHI, Dec 1: The government increased the rates of profit on different products of the National Savings Scheme (NSS) on Monday.

The government has set a target of Rs150 billion to be raised through the scheme. Last year’s target was Rs81 billion.

The rate of profit on the Pensioners’ Benefits Scheme and Bahbood Savings Certificates has been raised from 15 per cent to 16.8 per cent — the highest so far. Profits on Regular Income and Special Savings Certificates have been increased to 15 per cent and 15.2 per cent, respectively. Return on Defence Savings Certificates will be increased later.

Analysts said the upward revision in NSS rates was expected after an increase in the policy interest rate to 15 per cent, but the raise looked less charming for investors in the wake of inflation at over 25 per cent.

The higher NSS rates will mount pressure on banks already starving for liquidity to mobilise deposits. Banks are now following the ‘unconventional approach’ for deposit mobilisation, reflecting the gravity of the problem they are facing.

Sources said that banks were offering higher than the announced returns to depositors by approaching individuals.

The Bank of Punjab is offering the highest return — close to 20 per cent. The ABL is offering interest on deposits in advance.

“The NSS rates are highly attractive because investment in its schemes is risk-free,” a banker said, adding that the recent turmoil in the global banking system had shaken investors’ confidence.

‘With the hike in NSS rates both the government and banks are now under pressure. The government will try to raise maximum revenue through the NSS while the banks will have to offer more profits. The government’s debt will increase and resultantly the debt-servicing will go up,” said the banker.