Net sales of savings certificates experienced a drastic year-on-year decline of over 309% in the first 10 months (July-April) of FY24 compared to the same period in FY23, mainly due to persistent high inflation and steep bank interest rates.
According to Bangladesh Bank data, the net sale of savings certificates decreased by Tk14,648 crore from July to April of FY24. In contrast, the net sales were negative Tk3,579 crore during the same period in FY23. In eight of the first 10 months of FY24, encashment rates surpassed new purchases.
The net sale of savings certificates represents the remaining amount after paying the interest and principal on previously sold certificates. While declining investment in savings certificates can be positive for the government, as it reduces internal borrowing, it also reflects lower public saving behavior.
April 2024 saw a further decline in net sales compared to April 2023, with negative net sales of Tk2,103 crore. March was even worse, with negative net sales of Tk3,653 crore. In April last year, net sales were positive at around Tk582 crore.
The first two months of FY24 saw positive net sales of Tk5,562 crore, but this trend reversed from September onwards, with consistent negative net sales in subsequent months.
Market insiders attribute the decline to restrictions on savings certificate investments, high inflation reducing people’s saving power, and increased bank interest rates. Inflation has been above 9% for the past 15 months, forcing some investors to use their savings. Additionally, the upper limit of purchase for a single person has been reduced, and attractive bank deposit rates have drawn potential savings certificate investors.
Interest rates on savings certificates currently range from 11.04% to 11.76%, depending on the type, but are lower compared to some bank deposit rates, which can go up to 12%. Digitalization and increased transparency have also curbed large anonymous investments in savings certificates.
