KARACHI, Feb 17: The finance ministry has not approved the proposal of Central Directorate of National Savings (CDNS) to increase the rate of return by average one per cent on all its products, at least for now.
Senior citizens and fixed income segments who have parked their savings in NSS will have to put with the current rates. The nominal rate of profit is under nine per cent for all schemes but for ‘Behbood’.
The Behbood scheme is specially designed for senior citizens and offers around 12 per cent profit. After discounting for inflation the real rate of return on saving schemes is very meagre (under three per cent for special schemes and about six per cent for Behbood).
Secretary General Ministry of Finance Naveed Ahsan confirmed to Dawn on Saturday from Islamabad that the ministry had not yet decided on the proposal of profit rate revision made by the CDNC in December. “We have not taken any decision in this regard,” he said categorically refuting the rumours that the government had decided to increase the rate of profit on saving schemes that would be notified shortly.
Earlier the CDNS had proposed to offer additional average one per cent profit on all its products in order to attract new savers and to offer better returns to its depositors. But the proposal needs approval of the finance ministry which notifies it for implementation.The senior official did not specify any reason for not approving the CDNC proposal. He, however, said that many factors have to be taken into account when the rates are revised. He said that the ministry was evaluating repercussions of such a change on the money market.
Sources in the finance ministry told Dawn that commercial banks were opposing the move tooth and nail. “These banks are under pressure from State Bank to improve returns to depositors and feel that the move will bring new pressure on them for increasing the rate of returns”.
Analysts were critical of the government’s current stance that had allowed the banks to stretch the banking spread beyond limits depriving depositors of just return, and on the other hand it was reluctant to permit the CDNS to improve profit rates on saving schemes.
“The government is favouring commercial banks and is not inclined to let depositors to get better returns even on money that they have invested in its securities. This is grossly unfair,” said a senior analyst.
The argument that the market will be disturbed if the CDNS is allowed to revise upwards its profit rates was rejected. “Yes the market will be affected but it needs to be jolted as currently it is highly unfair with savers and favours commercial banks,” he emphasised.
Mr Bhawal, Regional Director of CDNC in Karachi, told Dawn that rates were normally revised biannually. “They were revised in June 2006 and we were expecting another revision in January,” he said.