KARACHI, Dec 27: Falling interest rate has diverted deposits from banks to National Saving Schemes as it amassed huge sums in five months, more than the deposits mobilised during the fiscal year 2011-12.

Latest official figures showed that deposits mobilised by the government suddenly witnessed a jump of 290 per cent during July-November of the current fiscal year.

During the said period, total deposits mobilised under NSS rose to Rs229.5 billion.

This was much higher than Rs77 billion mobilised under the same head during five months of previous year.

Thought the NSS rates were revised downward, these are still attractive than banks.

Under the umbrella of NSS, the Defense Saving Certificate offers 11.04 per cent, Regular Income Certificate offers 10.56 per cent, Special Saving Certificates 9.90 per cent, Behbood Saving Certificates offer 12.96 per cent and Pensioners Benefits Account offers Rs12.96 per cent.

According an official report, these rates were last revised in October and are applicable till to-date.

The figures showed that the government could mobilise Rs188 billion during the last entire fiscal year.

Banking experts said the rates offered under the NSS were still attractive compared to banks which are facing tough time after losing their attraction for government papers.

The State Bank slashed the policy interest rate by 4.5 per cent to 9.5 per cent, from 14 per cent during the last 15 months.

This quick shift in the interest rate hit the banks’ effort to raise their deposits.

Experts said the poor return from banks forced depositors to put their money in NSS which is more attractive and risk free.

They said that the sudden rise in NSS indicates the deposits from banks came out to land in NSS.

Banks have been profitable for the last many years by just investing their money into government papers which offered the return as high as about 14 per cent.

The wide banking spread has been a practice for banks as they used to keep most of their profits and pay poor return to depositors.

This high profit strategy hurt banks’ deposit mobilization, particularly small and medium banks failed to raise money as per their requirements.

A number of banks, at least nine banks, remained unable to meet the Minimum Capital Requirement. The low deposit base of small and medium banks deprived them of share in profit of the banking in Pakistan since the five big banks earn over 80 per cent profits of the entire banking industry.