Net sales of national savings certificates or NSCs bounced back in July as depositors shifted their funds from struggling banks to safer, low-risk instruments like NSCs.
According to Bangladesh Bank data, net NSC sales rebounded to Tk 2,187 crore in July, after a sharp negative balance of Tk 3,381 crore in June.
Bangladesh Bank officials attributed this shift to the ongoing crisis in the banking sector, where several banks have struggled to return depositors鈥� money, eroding public trust.
Media reports exposing widespread irregularities, unlawful loan withdrawals, capital flight and collusion between the central bank and loan defaulters have worsened the situation, prompting depositors to seek safer investments.
In addition to financial instability, political unrest in July, marked by student protests over quota reforms, led to curfews and internet blackouts, creating further uncertainty and pushing people to invest in secure instruments, according to bankers.
Sheikh Hasina resigned as prime minister and fled to India on August 5 amid student movements.
Throughout the 2023-24 financial year, net NSC sales had largely been negative due to soaring inflation, with net sales hitting negative Tk 21,124 crore in July-June of FY24, compared with the negative balance of Tk 3,295 crore in the same period of the previous financial year.
This negative trend occurred as principal repayments outpaced new sales, draining funds from the government鈥檚 exchequer.
Bankers said that the negative trend reflected that people were relying on their savings amid acute and prolonged inflationary pressures. Rising living costs have left many without extra funds for savings and investments, they said.
The Bangladesh Bureau of Statistics reported overall inflation at 10.43 per cent in August, staying near 10 per cent since March 2023, leaving many without extra funds for investment.
Despite inflationary pressures, many are now opting for NSCs due to their relative safety compared with banks.
Bankers said that people now preferred investing in government treasury bills and bonds due to their high-interest rate earnings, with treasury bill interest rates soaring to a record 12 per cent.
The total outstanding investment in NSC reached Tk 3,48,456 crore in July, down from Tk 3,60,357 crore in the same period of the previous year.
In FY23, the government borrowed Tk 80,858 crore against repayments of Tk 84,154 crore, underscoring the impact of rising inflation and the banking sector鈥檚 instability on national savings.
Amid economic crises, the government had prioritised repayment over further borrowing through these high-interest instruments.
Bankers attributed the previous decline in NSC investments to a reduction in interest rates by 1-2 per cent on all savings certificates in September 2021.
The introduction of a maximum limit and the mandatory inclusion of national identification documents during the purchase of savings certificates had further exacerbated the decline, they said.
The Bangladesh Bank has also made it mandatory to submit proof of the previous year鈥檚 income tax returns for investments in savings certificates worth more than Tk 5 lakh.
