ISLAMABAD: The federal government has announced a very sharp reduction in the profit rates in National Savings schemes with effect from November 11.
Profit rates, according to the National Savings Department, on savings accounts stand cut from 16% to 13.5%, a lowering of 250 basis points. This is in tune with the general revision of interest rates applicable to some savings schemes.
In addition to the savings account rates, regular income certificates and defense savings certificates have also gone down. Regular income certificates profit rates now stand reduced by 10 basis points at 12.1%. Then, short-term savings certificates have also been cut in profit rates, but the details are not mentioned.
The department also restructured the profit rates on other schemes including the Savings Account, Sarwa Islamic Term, and the Islamic Savings Account.
The profit rate for Islamic Savings Accounts is lower by 72 basis points, standing at 10.44%. These changes, particularly to setting Islamic Savings accounts, show sensitivity to macroeconomic objectives rather than supporting these schemes, especially when the variable is declining interest rates and the rate of inflation.
These reductions in returns will surely affect these savings-oriented investors, but take a look into the larger picture of the economic development whereby the state is also attempting to manage inflation and interest rates. With the looming probability of further cuts to the SBP key policy rate, these adjustments might also be seen as a part of a more comprehensive strategy to encourage economic recovery.
