ISLAMABAD: In a major policy decision, the Federal Government has decided to impose ban on institutional investment in National Savings Schemes (NSS) from July 1, 2020, on the recommendations of Governor State Bank of Pakistan (SBP) Dr Reza Baqir, sources in Finance Ministry told Business Recorder. The Central Directorate of National Savings (CDNS), which is an attached Department of the Ministry of Finance, deals with the savings schemes, playing an important role in mobilization of domestic savings, budgetary support and management of inflationary pressures.
Some of the national savings schemes also provide necessary social protection to the poor and vulnerable segments of society through higher interest rates against deposits.
Currently, CDNS is managing ten different national savings schemes and caters for needs of small savers, youth, senior citizens, pensioners, widows and families of Shuhada.
According to sources, Governor, State Bank of Pakistan (SBP), has pointed out that currently institutional funds like Provident, Pension, Gratuity and Superannuation Funds are allowed to invest in national savings schemes as well as marketable Government of Pakistan securities (i.e. MTBs and PIBs).
The sources said NSSs provide an open option to investors to sell them before maturity at a price which is not linked to prevailing market yields. Thus, these financially sound institutional investors exploit the opportunity by shifting their investments to NSSs which results in higher interest payments by the GoP. It was recommended that institutional investors should not be allowed to invest in NSSs and that NSSs may only be restricted to retail investors.
The sources maintained that the proposal of the Governor SBP for elimination of institutional investors from national savings schemes has been thoroughly examined in Finance Division and it has been decided that institutional investment in national savings schemes may be stopped and discontinued with effect from 1st July, 2020.
It was also informed that in order to comply with the above decision, CDNS has proposed necessary amendments in the relevant Rules of the following national savings schemes:(i) Defence Savings Certificates (DSC) Rules, 1966- proposed amendment in Rules(s), sub -rule 5 of rule(4);(ii) Regular Income Certificate (RIC) Rules, 1993- proposed amendment in clause(v) of Rule 4;(iii) Special Savings Certificates (SSC) Rules, 1990-proposed amendment in clause(v) of Rule 4;(iv) Short Term Savings Certificates (STSC), Rules, 2008-proposed amendment in clause (d) of Rule 4 and ;(v) Post Office Savings Bank(POSB), Rules, 1961- proposed amendment in sub-clause(iv) (a) of Rules 5 and sub-clause(iii) of clause(a) of Rules 36-E and ;(vi) National Saving Deposit Account (NSDA), Rules, 1974-proposed amendment in clause (v) of the sub-Rule 1 of the Rule-2.
The draft notifications proposing amendments in relevant Rules of the above national saving schemes have been vetted by Law & Justice Division, subject to approval of the Federal Cabinet.
The sources said the proposal was submitted before the Federal Cabinet on November 17, 2020 in the form of minutes of Cabinet Committee on Disposal of Legislative Cases (CCLC) headed by Minister for Law and Justice Farogh Nasim which approved it.
The CCLC approved the proposal of Ministry of Finance, in its meeting held on November 5, 2020.
Copyright Business Recorder, 2020
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