Abdur Rahim Harmachi, Chief Economics Correspondent, bdnews24.com
Published: 2020-07-19 23:41:12 BdST
However, the outbreak of the novel coronavirus has dealt a heavy blow to the country's economy, throwing Farida's life into disarray in the process. Her husband Bazlur Rashid works in a private company but has not been paid his salary for the last two months.
It forced Farida into encashing half the amount of her savings certificate worth Tk 500,000 in a bid to keep her household afloat during the ongoing crisis.
“What could I do? I'd managed to keep things going until now but I can’t do it anymore. The coronavirus epidemic has changed everything. I don't have any choice but to encash the certificates before they mature,” she told bdnews24.com.
Farida is just one of many others who are encashing their savings certificates to pay for their living costs and survive the pandemic.
The sales of savings certificates have hit the rock bottom under the current circumstances. In some months, the dividends or interests on the savings certificates outstripped its net sales.
A large number of people gathered at Bangladesh Bank and Sonali Bank in Motijheel braving the pandemic on Thursday. Some of them were there to collect the monthly interest on their savings certificates while others came to submit applications to reclaim their investment. A few also showed up to withdraw their application to buy a savings certificate.
Savings certificates are sold on the ground floor of Bangladesh Bank building in Motijheel. Holders of the instrument also draw the interest and encash the certificates before or after it matures at the same place.
From July last year, the monthly interest Sanchayapatra is transferred to the respective bank account of a client through electronic fund transfer (EFT). Those who do not maintain a bank account are no longer eligible to buy savings certificates.
The government has also made it mandatory to use tax identification number or TIN to buy a Sanchayapatra worth for more than Tk 100,000.
Many people, who bought the saving certificates before the new requirements were instated, arranged for an EFT of their interest and basic payments to their bank accounts. Those who do not have access to EFT need to go to the bank or branch they bought the instruments from to collect the interest and returns. However, they must to apply to the specific branch they bought the certificate from in order to encash the Sanchaypatra before its maturation.
The Department of National Savings published data on the sale of savings certificates until May although the 2019-20 fiscal year ended in June.
In the 11 months of the last fiscal year, savings certificates worth Tk 110.11 billion were sold in total, according to the DNS. The sales were worth Tk 467.31 billion in the same period the year before.
Sanchayapatra sale was worth Tk 4.3 billion in May this year, which is three times less than the Tk 32.57 billion a year ago.
But the government posted a net negative sale of savings certificates in April after payinh Tk 6.62 billion more than what it acquired through the sales as interest to investors in April.
The net sale is the leftover amount after the payment of the interest on the Sanchayapatra. This amount is deposited in the national treasury and the government uses it for implementing national programmes. In exchange, the investors are paid a monthly interest.
As the savings certificates offer a high interest rate, its sales have skyrocketed over the past few years.
In the fiscal year 2016-17, the government netted Tk 524.17 billion from the sale of savings certificates, which dropped a to Tk 465.3 billion the following year. The sales rose again in FY19 to Tk 499.38 billion before the government increased the tax at source on the Sanchayapatra interest to 10 percent, from 5 percent, to bridle purchases.
This measure along with other conditions such as having TIN and bank account, pushed the sales down.
People turned towards investing in savings certificates due to a drop in interest rate on bank deposits and a flagging capital market, which in turn increased the government's loan burden, said economist Zaid Bakht of Bangladesh Institute of Development Studies (BIDS).
The government had to pay a large sum of money as interest every month.
“The government was left with no option but to tighten the measures relating to the sale of savings certificates. I believe it did the right thing.”
This is why the sales dropped in the last fiscal year, according Bakht, also the chairman of Agrani Bank.
“There’s nothing to do. People are spending their savings to survive during the pandemic. Many have lost their jobs; some companies are unable to pay their staff. Therefore, everyone is spending whatever savings they have,” he said.
People belonging to the middle class are suffering the most during the pandemic, according to Ahsan H Mansur, executive director of Policy Research Institute.
"People from the lower-income groups receive help from the government and others. But middle-class people can’t seek any assistance and are forced to spend their savings. Those without any savings are trying to manage by borrowing from others,”