Classifieds | Archives | Jobs | About TGT | Contact | Subscribe
 | 
Last updated 8 minutes ago
Printer Friendly Version | TGT@Twitter | RSS Feed |
HOME LOCAL MIDEAST ASIA WORLD BUSINESS SPORT OPINION WRITERS
Pakistan’s policy rate hike is expected to fuel investment in saving certificates
February 10, 2018
 Print    Send to Friend

KARACHI: Investments in saving certificates that have been declining for the past couple of years amid dovish interest regime are expected to recover after an overdue change in the central bank’s soft monetary policy stance, analysts said on Friday.

The analysts expect investors to pour money into savings as they could prefer fixed-income assets in a rising interest rate environment.

“An improvement in profit rates and increased offerings by the CDNS (Central Directorate of National Savings) are likely to fire up demand for the NSS (National Saving Schemes), increasing domestic savings in times to come,” Khurram Schehzad, chief commercial officer at JS Global said. “When interest rates are down investments are shifted from the fixed-income assets to other avenues such as foreign currency, stock market and real estate.”

Investments in various national saving certificates fell 18.7 per cent to Rs92.316 billion in the first half of the current fiscal year of 2017/18, the central bank’s latest data showed, as investors diverted funds to other lucrative avenues.

A CDNS spokesperson, however, argued that the dollarisation was not the main reason behind a slowdown in NSS inflows.

“The anticipated depreciation of rupee against the dollar is not the reason for lower savings growth rate,” the spokesperson said. “National Savings investors are mainly individuals who do not risk to arbitrage for the short-term investments/gains.”

The spokesperson further said at least four new products, including sharia-compliant product and overseas Pakistanis savings certificate will be launched within the next five months to offset the reduction in the interest rate-sensitive schemes.

Industry officials said the profit rates on NSS are pegged with primary auction yield of market treasury bills and Pakistan Investment Bonds (PIBs).

“There have been no primary auction rates of PIBs for the last six months,” an official said. “This temporary anomaly in rates is likely to be addressed with the recent increase in SBP’s (State Bank of Pakistan) policy rate and the resumption of PIB auctioning from this month onwards.”

SBP raised its key policy rate by 25 basis points to 6 per cent after more than one-and-a-half year on January 26.

Investments

The CDNS spokesperson said the directorate and finance division are ‘very well’ aware of this situation and trying to arrest the downward trend in investments as early as possible.

“In this respect, National Savings is taking all the measures whereby its investments become less dependent on interest rates,” he added.

A key objective of the NSS is to generate funds for the financing of budget deficit as well as promote savings.

Investments in NSS have been declining due to low yields on different instruments amid reduction in policy rate during the last few years.

Savings mobilised through NSS stood at Rs206 billion in FY2017 compared with Rs233 billion in the previous fiscal year. Profit rates on various saving certificates/schemes with different maturity profiles stayed flat since February last year. Interest rates on saving certificates are hovering in the range of 6 to 9 per cent.

NSS has already launched third party payments through the saving accounts, using them as operating accounts like banks, which will help in retaining the investments with CDNS and enhancing deposits in its savings accounts.

Banks are reluctant to participate in long-term debt securities and instead aggressively participate in t-bills auctioning.

In the recent past, government mainly met its borrowing requirements through short-dated instruments of SBP and banks.

Internews

Add this page to your favorite Social Bookmarking websites
Comments
 
Post a comment
 
Name:
Country:
City:
Email:
Comment:
 
    
    
Related Stories
Pakistan to be world trade hub
Islamabad: A top Pakistani lawmaker has said that the country was turning into a regional and international trade hub due to the strategically located Gwadar deep sea por..
SBP allowed to implement B2C, C2B through foreign entities
ISLAMABAD: Prime Minister Imran Khan allowed the State Bank of Pakistan (SBP) and its authorised dealers (banks) to implement Business to Customer (B2C) and Customer to B..
Eighteenth amendment may damage revenue generation: PEW
ISLAMABAD: The Pakistan Economy Watch (PEW) Chairman Brig (Retired) Muhammad Aslam Khan said the Eighteenth Amendment of the constitution has added to confusion in the ta..
Pakistan’s auto sales fall 6.4% in current fiscal year’s first two months
Islamabad: Pakistan’s auto sector sales contracted for the first time since the fiscal year of 2014-15 (excluding taxi scheme) during the first two months of the fiscal y..
Pakistan to focus on economic issues to boost production
ISLAMABAD: Islamabad Chamber of Small Traders termed success of PTI in the general elections is a refreshing breeze as the welfare of the poor has been made primary econo..
FRONTPAGE
 
GALLERY
 
PANORAMA
 
TIME OUT
 
SPORT
 
 
Advertise | Copyright