Higher inflation: Hike in NSS profit rates unlikely to attract investors

ISLAMABAD: The recent increase in profit rates of savings accounts is unlikely to attract investors to products on sale in National Savings Schemes due to high inflation in the country.

This was stated by a source in the Finance Ministry on condition of anonymity by arguing that when inflation is as high as it is today sustaining consumption at current levels to the extent possible is the priority while savings are out of the question.

Data on the State Bank of Pakistan (SBP) website indicates that NSS (net of prize bonds) was Rs 3,480 billion in February 2022 declining to Rs 2,948.2 billion in January 2023 and to Rs 2,915.7 billion by February this year.

NSS: Profit rates increased

The official from the Finance Ministry further contended that there are no signs of a possible decline in inflation in the coming months and acknowledged that the government is the sole borrower from NSS.

Profit rates of NSS schemes are linked to movement of Treasury bills (T-Bills) and Pakistan Investment Bond (PIB) rates he stated adding that the government recently raised returns on existing schemes and is planning to introduce new products of saving schemes to attract investment.

The federal government raised the profit rate on national savings schemes effective on April 10.

Former Finance Minister Dr Hafeez Pasha termed the increase in profit rates of NSS positive for two reasons: it incentivises people to invest their saving and these savings would help create a secondary capital market which is the need of the hour for the benefit of the people.

The rate of profit on Behbood Savings Certificates (BSC) has been increased by 2.64 percent to 16.56 percent and the profit rate on Special Savings Certificates (SSC) has been increased by 3.93 percent to 17.13 percent.

The Regular Income Certificates’ profit rate has increased by 24 basis points to 12.84 percent and the Savings Account (SA) has gone up by 5 percent to 18.50 percent.

The rate of return on Defence Savings Certificates (DSC) has been increased by 2.61 percent to 14.87 percent. After the revision, the federal government raised the profit rate on Shuhada Family Welfare by 16.56 percent, Saving Accounts by 18.50%, Pensioners Accounts by 16.56 percent, as well as for the Short-term Saving Certificates.

Copyright Business Recorder, 2023