The federal government has announced a marginal raise in the rates of profit on five different saving schemes by 8 to 50 basis points (bps) with a view to encourage new investment and rationalise the rates according to Pakistan Investment Bonds.
The Directorate of National Saving Schemes (NSS) has recently demanded of the Ministry of Finance an increase in the profits of different saving schemes and, after approval by the Ministry, NSS has raised profit rates for Defence Savings Certificates (DSC), Regular Income Certificates (RIC), Behbood Saving Certificates (BSC), Saving Accounts (SA) and on Special Saving Certificates (SSC).
Analysts said that food inflation had been rising for last two years and due to low profit rates investors had diverted to other banks' schemes. Therefore, the NSS decided to raise the profits on different saving schemes.
The rate of profit on DSCs having 10 years' maturity has been raised by 12 bps, and rate of return on maturity would work out at 10.15 percent from previous 10.03 percent per annum. DSCs are available in denominations of Rs 500, Rs 1000, Rs 5,000, Rs 10,000, Rs 50,000, Rs 100,000, Rs 500,000 and Rs 1,000,000.
After raise of 12 bps, every Rs 100,000 DSC value will become Rs 107,000, Rs 116,000, Rs 126,000, Rs 138,000, Rs 151,000, Rs 166,000, Rs 184,000, Rs 206,000, Rs 232,000 and Rs 263,000 on completion of 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10 years, respectively. The new rates are effective from June 23, 2007.
Profit on five years' maturity scheme namely RIC has been raised by 30 bps to 9.54 percent per annum from 9.24 percent per annum. At the prevailing rates monthly profit of Rs 795 will be paid on investment of each Rs 100,000.
RICs minimum investment limit is Rs 50,000. However, there is no maximum limit of investment in this scheme. Profit is paid on monthly basis, reckoned from the date of issue of certificates.
Profit rate on BSC, special saving scheme for widows and senior citizens has been increased by 12 bps from 11.52 percent to 11.64 percent per annum. Now monthly profit of Rs 970 will be paid on investment of each Rs 100,000 under this scheme.
NSS has raised 50 bps on Savings Account, oldest scheme designed to encourage small savers and to meet their day to day needs. After this surge profit rate on saving account has reached 6.50 percent from 6 percent per annum. In addition, profit on three years' maturity scheme SSC has been raised by 8 bps to 9.25 percent previously stood at 9.17 percent per annum.
Analysts said that an outflow from saving schemes was rapidly increasing, which pushed the NSS to increase the profit rates on different saving schemes and certificates. Currently, overall saving schemes deposit under all schemes announced by NSS stood at around Rs 900 billion and billion of rupees has been withdrawn from these schemes, they added.
Rates of Defence saving schemes and regular income certificates are linked with Pakistan investment bonds, whose rates also have been increased during last auctions. Therefore, NSS has raised the rates on these schemes, analysts said.