Interest rate cuts for postal savings accounts only

The government has cut the interest rate for postal savings accounts and kept the existing rates unchanged for national savings certificates, clarified the finance ministry yesterday.

On Thursday the Internal Resources Division of the finance ministry issued a notice informing the lowering of interest rate on one-year savings to 5 per cent from 10.20 per cent with immediate effect.

For two-year schemes, the rate was cut to 5.50 per cent from 10.70 per cent. For three-year schemes it was slashed to 6 per cent from 11.28 per cent.

Many construed the notice on Thursday as the government slashing the interest rates on national savings instruments too and was left panic-stricken thinking their sole source of income has suddenly contracted.

Now, the finance ministry has calmed their nerves: the rate cuts were only for savings accounts maintained with the postal department.

Depositors can withdraw profits from their postal savings after six months. In such case, the interest rate would be 4 per cent for one-year schemes, 4.50 per cent for two-year schemes and 5 per cent for three-year schemes, according to the circular.

Previously, the rates were 9 per cent, 9.50 per cent and 10 per cent respectively.

However, those who opened postal savings account before February 13 would get their profits based on previous interest rates, a finance ministry official said.

The government has tightened the rules for savings instruments from this current fiscal year with the view to getting savers to move back to banks for the purpose of parking their funds.

For example, depositors must have tax identification number (TIN) and bank accounts for opening postal savings accounts. Besides, the government has slapped additional 5 per cent tax on their profits.

These measures have led to a outsize decline in the sale of government savings instruments. People bought savings instruments worth Tk 5,433 crore between the months of July and December last year. The amount was Tk 24,993 crore a year earlier.

However, the 12 per cent interest rate on savings certificates of three- and five-year durations have remained unchanged.