Govt Plans Rate Cut on Savings Certificates
Thursday, 14 January 2010

The government plans a cut in interest rate on savings certificates 'to a reasonable level'.

It is also considering changes to duration of investment and the number of saving certificates and other aspects.

Finance minister AMA Muhith hinted at the possible move at a meeting of the finance ministry on Wednesday.

At the meeting, a committee was formed with deputy governor of Bangladesh Bank Ziaul Hasan as its head to make recommendations in two months.

Muhith later told reporters, "Interest rate on all types of saving certificates is very high and it should be rationalised."

Asked about the possible rate, he said, "interest rate on saving certificates might be one percent higher than the inflation rate."

Inflation might hit 6.5 percent towards the end of the year. So, interest rate on investment in saving certificate might be 7.5 percent at best.

Interest rate on investment in eight types of saving certificates currently range between 6.5 and12.5 percent and between 6.5 and 8.5 percent in commercial banks. The high interest rates tempt many to invest in saving certificates.

Investment in saving certificates during the first five months of the current fiscal year surpassed the total investment of last fiscal year.

Sources at the finance ministry said investment was Tk 3633.32 crore during FY 2008-09 while the amount rose to Tk 4463 crore during July-November of the current fiscal year.

The finance minister said, "There are numerous savings certificates which are more than the requirement and some savings certificates are exempted from income tax."

"There is no need for savings certificates with different durations and savings certificates with two durations might exist."

Muhith said, "The committee will make recommendation considering all savings intruments."

President of Bangladesh Economic Association Quazi Kholiquzzaman, however, said interest rate can be cut by maximum one percent.

Kholiquzzaman told, "Common people especially the retired population mostly invest in saving certificates and so existing rate is more befitting."


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