The net sales of National Savings Certificates continued to decline in the first 10 months of the current financial year due mainly to the impact of prolonged inflation, changing investor behaviour, and shifting government priorities.
According to Bangladesh Bank data, net NSC sales stood at negative Tk聽7,431 crore during the July鈥揂pril period of FY25, a slight improvement from negative Tk聽14,648 crore in the same period of the previous year.
The negative sales indicate that repayments exceeded fresh investments, resulting in a net outflow of funds from the government鈥檚 exchequer.
Bankers and analysts attribute the drop primarily to persistently high inflation, which has eroded disposable income and discouraged small savers from reinvesting.
Data from Bangladesh Bureau of Statistics showed that inflation remained elevated at 9.17 per cent in April, staying above 9 per cent since March 2023.
With household budgets under strain, many savers had to draw on their previous savings rather than purchase new NSCs.
At the same time, rising interest rates in the banking sector and on treasury instruments have made NSCs less attractive.
Treasury bill rates have soared to nearly 12 per cent, prompting investors to shift toward these higher-yielding alternatives. Bankers note that now many entities prefer government treasury bills and bonds over NSCs due to better returns and more flexible investment terms.
Between July and April, the government borrowed Tk聽55,991 crore through NSCs but repaid Tk聽63,423 crore, leading to a net negative position.
The government, facing mounting economic pressure and high interest obligations on NSCs, has focused more on repayments than fresh borrowing from this costly source of funds.
While the government aimed to borrow Tk聽1.37 lakh crore in FY25 to cover the budget deficit 鈥� including Tk聽21,000 crore from non-bank sources and Tk聽12,500 crore from NSCs 鈥� weak performance in NSC sales and attractive bank rates redirected borrowing toward the banking system.
As a result, it borrowed Tk聽82,056 crore from commercial banks during the same period, exacerbating the liquidity crisis in the sector.
Despite the overall negative trend, the months of March and April showed a rebound in NSC net sales, recording Tk聽80.55 crore and Tk聽1,260 crore respectively. This uptick reflected the government鈥檚 renewed focus on NSC borrowing in response to tight liquidity in the banking sector.
NSC performance has been on a downward trend for the last three years. Net sales stood at negative Tk聽21,124 crore in FY24 and negative Tk聽3,295 crore in FY23.
Experts also point to regulatory changes, making certificates procuring a bit tougher, as a reason behind declining NSC investments.
In September 2021, the government cut NSC interest rates by 1鈥�2 per cent and introduced stricter compliance requirements, such as submission of national ID and proof of tax return filings for investments exceeding Tk聽5 lakh.
These measures, according to bankers, discouraged many retail investors who valued discretion in their financial activities.
