The Central Directorate of National Savings (CDNS) has announced a significant increase in profit rates on all national savings schemes, effective from April 10.
The move comes after the State Bank of Pakistan (SBP) raised its policy rate to an unprecedented 21%, following a historic surge in secondary market coupons.
These new rates, the highest in over a decade, have been implemented in response to recent developments in the State Bank of Pakistan’s interest rate and Treasury bill yields, which have risen to approximately 22% this week.
The CDNS has raised the returns on saving accounts and certificates to ensure better returns for small savers, while still keeping them slightly higher than the central bank’s policy rates. This approach allows for improved profitability without imposing a significant burden on the government budget.
It is worth noting, however, that the government is currently offering returns of over 21% to secondary market players investing in Treasury bills and investment bonds while paying lower returns to its own citizens.
The Ministry of Finance released several notifications indicating a significant increase in profit rates across various national savings schemes by the CDNS on Friday.
The profit rate on Defence Saving Certificates has seen a substantial rise of 261 basis points, increasing to 14.87% from 9.29% in May last year.
Additionally, returns on Behbood Savings Certificates, Pensioners’ Benefit Accounts, and Shuhada Family Welfare Accounts have all experienced a significant increase of 264 bps, now reaching 16.56%.
The Regular Income Certificates have also witnessed a rise in returns, increasing by 24 bps to 12.84% of total investment.
The CDNS has also raised the profit margin on the three-year Special Saving Certificates and Special Savings Account by over 400 bps, resulting in a rate of 17% for the first five profits and 17.8% for the sixth profit. This category now boasts an average return of 17.13%, up from the previous 13.1%.
The Saving Accounts (running accounts) have also experienced a substantial increase, rising by 400 bps to 18.5%.
Conversely, the Short-Term Savings Certificate has seen a hike in returns, with rates of 19.92%, 19.64%, and 19.82% for tenors of three, six, and twelve months, respectively, following an increase of approximately 380, 364, and 386 bps.
The CDNS has also taken action to implement the revised rate sheets by dispatching them to all regional offices, along with instructions to issue existing blank special savings certificates, regular income certificates, and defense saving certificates at the new rates starting from April 10.
The national savings schemes’ rates are typically announced every two months and are linked to the cut-off yields of long-term Pakistan Investment Bonds. At the latest auction held last week, the return on three-year and ten-year PIBs had surpassed 21%.