Widely advertised in the media and at various national saving centres throughout the country, the scheme to sell treasury bills to the general public seems to have died down with a whimper. According to reliable sources, the Ministry of Finance has finally blocked the initiative of the Central Directorate of National Savings (CDNS) for mobilising Rs 80 billion public savings through short-term treasury bills with a maturity period of three months to one year because of opposition from commercial banks and international lenders. Under the proposed scheme of the CDNS, treasury bills of three months, six months and one year were to be offered at the market-based interest rate of 12-13 percent per annum. The new initiative was launched on the premise that the government was already paying the same amount of interest on treasury bills to commercial banks, which were earning huge profits on government borrowings, without any extra effort and hence a saving scheme for common savers would not put any additional burden on the government and benefit the savers. In the past three years, national saving schemes have attracted Rs.750 billion, increasing the total portfolio to Rs 1.72 trillion by end-December, 2010.
We feel that the initiative of the CDNS had certain positive features but was largely not marketable in the prevailing culture of self-centred attitudes and the tendency of ordinary savers to continue following the old and simple patterns of making investment decisions. As it is, commercial banks do not generally pay to the ordinary depositors more than half the interest rates available on treasury bills and earn about 17 percent on their advances. Looking at this equation, it was a very good idea to offer more to the public directly at some cost to the banks, which are earning huge profits through an easy intermediation process. Also, it would have enhanced the awareness level of ordinary savers about the investment avenues available in the market and contributed somewhat in raising the saving rate in the economy. If the scheme could have become popular, it could have also some dampening effect on the prices of certain items ordinarily consumed by the targeted investors. However, the Ministry of Finance seems to have wilted under the pressure of commercial banks. Financial institutions feared that the new scheme would undermine the deposit base of the banking industry, because the depositors would withdraw their savings from the banks for investment in the treasury bills offered at the counters of the CDNS. Sadly, banks in Pakistan have come to prefer easy money and do not make extra efforts to mobilise higher level of savings by enlarging their coverage and designing attractive saleable products suitable to various sections of society.
The mistake on the part of CDNS, however, was not to conduct proper market research before launching the initiative. Our savers are not sophisticated enough to compare various investment options thoroughly and make informed financial decisions. Neither they have the capacity to engage the services of financial consultants. Therefore, they ordinarily prefer to continue investing in the old and tried schemes. Also, our savers avoid contact with the tax-man like the plague and would never like to have a meeting with him, even over a cup of tea and in a friendly atmosphere. Why bother about deploying their funds in treasury bills where some documentation may be needed when investment in Behbood Certificates and Pensioners Saving Accounts carries no such risk.