To implement single-digit interest rate in the country’s banking sector, the government on Thursday lowered interest on three-year fixed deposit to 6% from 11.28% on maturity
Slashing interest rate on savings in post office by half will make the lives of pensioners difficult as it has cut their earnings from the savings.
To implement single-digit interest rate in the country’s banking sector, the government on Thursday lowered interest on three-year fixed deposit to 6% from 11.28% on maturity.
Meanwhile, the rate for the first year and second year of the deposit has been set at 5% and 5.5% from previous 10.20% and 10.70% respectively.
“Since my retirement from government service in 2007, I bought post office savings certificate with my pension money to bear my expenses,” Abul Kashem told Dhaka Tribune.
"I used to get Tk1,800 a month from Tk2 lakh in interests, which helped to maintain everyday cost. But now the government has cut the rate and it came down to half, while the living cost went up sharply," Kashem lamented.
From now on, it would be very difficult to bear the expenses with the reduced interest rate, said a disheartened Kashem.
“Rate of interest on saving certificates should be based on market demands, which would determine the rate. But slashing the rate will hit the small savers hard,” former World Bank lead economist in Dhaka office Zahid Hussain told Dhaka Tribune.
"As small savers cannot buy the general savings certificate, post office saving was a better option for them. So where will the small ones go," he asked.
The rate also should be left to the market and there should be an option for small savers, otherwise they would backtrack from savings, he added.
A circular, released by the Internal Resources Division of the finance ministry on Thursday, also said the reduced interest rate would not apply to other savings certificates.
The investor may collect the profit every six months, for which they will get 4% in the first year, 4.50% in the second year and 5% in the third year.
Previously, this was 9%, 9.50% and 10% in the first, second and third years respectively.
Tax at source on saving certificates this year has also gone up from 5% to 10%.
This tax has also been imposed on fixed deposit bank accounts. For those with no TIN, the rate is 15%.
In the first five months of 2019-20 fiscal, there was a one-third fall in sales of savings certificate compared to sales in the corresponding period of last year.
Net sales of savings certificates were around Tk320 crore, which was Tk383 crore in the corresponding period last year.