The net national savings certificate (NSC) sales hit negative Tk 3,858 crore in the July-November period of FY24, compared to negative Tk 1,610 crore recorded year-on-year. The figures convey a concerning trend of an increasing number of investors cashing out.
The Bangladesh Bank published this data on Monday.
Speaking to The Business Post, former lead economist of World Bank Dhaka Office Dr Zahid Hussain said, “NSC sales have decreased for two key reasons. The purchase level of investors has declined, and these shareholders are not renewing their NSCs after maturity.
“So, the government is paying back investors instead of making sales, pushing the net position of NSCs into negative. Another reason is the many restrictions the government had imposed on NSC purchase.”
Currently, it is mandatory for investors to submit their tax returns during NSC purchase. Only the TIN number used to be enough for buying NSCs, he added.
On condition of anonymity, a senior central bank official said, “The government was facing the pressure of repaying high interest to their investors in NSC. As a result, it started to impose many restrictions on NSC purchases from 2019.”
Stating that key reasons behind the fall in NSC sales are declining purchase power and high prices of essential commodities, Policy Research Institute of Bangladesh (PRI) Executive Director Ahsan H Mansur said, “Investors are suffering due to high inflation in the country.
“NSC investors are not renewing their certificates, so net sales are in the negative. Investors are suffering more in FY24. As a result, net NSC sales sank year-on-year in the first five months of current FY.
Budget deficit and NSC
To meet the deficit in the national budget, the government borrows directly from the people by selling national savings certificates. However, their high-interest rate also increases the government’s interest expenses.
Therefore, to discourage excessive NSC purchases since 2021, the government has made the submission of tax certificates mandatory and reduced the purchase limit.
Ahsan H Mansur believes that the sale of savings certificates has decreased compared to previous years due to this reason. For the current fiscal year, the government aims to sell NSCs worth Tk 18,000 crore.
