The government aligns interest rates with market trends

The interim government has revised the interest rates of five savings certificates, aligning them with market rates for the first time.

Interest rates for these savings tools have been increased by 1.0 percentage point for the January-June period, with the new rates retroactively effective from January 1, as stated in a press release by the Internal Resources Division (IRD) on Wednesday.

Additionally, the IRD has replaced the previous three-tier system with a two-tier structure for these savings schemes, aiming to provide equitable benefits to underprivileged groups. The two new tiers are for investments up to Tk 750,000 and above Tk 750,000.

Earlier, Chief Adviser Prof. Muhammad Yunus approved the proposal to revise the interest rates for these certificates. Under the adjustments:

• For investments up to Tk 750,000 in the five-year Bangladesh Savings Certificate, the interest rate is now 12.40%, while investments exceeding Tk 750,000 will earn 12.37%. Previously, the rate stood at 11.28%.
• For the three-year Quarterly Profit Savings Certificate, investments up to Tk 750,000 will receive 12.30%, and amounts above this threshold will earn 12.25%, compared to the prior rate of 11.04%.
• The five-year Pensioner Savings Certificate now offers 12.55% for investments up to Tk 750,000 and 12.37% for larger amounts, up from the previous rate of 11.76%.
• For the five-year Family Savings Certificate, the rate is set at 12.50% for investments up to Tk 750,000 and 12.37% for investments exceeding that amount, compared to the earlier rate of 11.52%.
• For the three-year Post Office Fixed Deposit, investments up to Tk 750,000 will now earn 12.30%, while higher investments will earn 12.25%, up from the previous 11.04%.

Currently, banks offer fixed deposit rates ranging from 9.0% to 11%, while savings schemes previously yielded returns of 11% to 11.5%.

Officials attribute the move to declining domestic revenue and reduced reliance on borrowing from the banking sector, leading the government to focus on raising funds through savings certificates.

In the fiscal year 2022-23, net borrowing from savings certificates was negative, amounting to Tk 33.47 billion. The original budget for the fiscal year targeted Tk 180 billion in net borrowing, later revised to a negative Tk 73.10 billion.

For the current fiscal year, the government has set a significantly higher target of Tk 154 billion in net borrowing from savings certificates.