Savings certificates still lucrative despite rate cut
By this time, it is known to many that the government has reduced the interest rate on savings certificate and wage earners bond for investments above Tk 15 lakh.
The reduction disheartens many, raising the question: which are the investment opportunities that provide secured returns at a time when interest rates offered by banks hovers around the inflation rate -- 5.36 per cent in July-- bringing either negative or zero return.
Until September 20, the government offered various interests between 11.04 per cent and 11.76 per cent on savings schemes irrespective of the investment amount.
A day later, the government introduced investment slabs and slashed the interest rate by 1 percentage point to 3 percentage points for investments above Tk 15 lakh in order to reduce the state's burden to pay interest and discourage high income people to park money in savings schemes meant to give support to low income groups.
The Internal Resources Division of the finance ministry said the new rate would be applicable for fresh investments.
The interest rate for investments of up to Tk 15 lakh remains unchanged, small and low-middle income savers will continue to enjoy the same return from investment in savings tools. This applies to fresh investment.
And the lowest interest rate for savings schemes for Tk 30 lakh plus is 9 per cent which is still the highest among other secured investment opportunities and fixed deposit rates offered by banks.
"For those who do not want to take risk, savings instruments are lucrative," said a senior official of Bangladesh Bank.
Bankers said there were investment opportunities in treasury bills and bonds but the rate of interest was still below the return from savings tools, namely 5-year Bangladesh Savings Certificate, 3-month profit bearing savings certificate, family savings certificate, pensioners savings certificate, term deposit at Post Office Savings Bank and Wage Earners Bond.
If anyone seeks higher returns, the person will need to invest in stocks.
But there is risk of losses too resulting from a decline in prices of the shares.
Mahiul Islam, head of retail banking of Brac Bank, said a number of banks hiked the interest rates for fixed deposits after Bangladesh Bank's directive that interest on deposits should not go below the inflation rate.
Bangladesh Bank data showed that the interest rate on fixed deposits of three months and above offered by banks was as much as 6 per cent.
Islam informed that Brac Bank offers 5.5 per cent to 5.6 per cent as interest on fixed deposits of three months and above.