The government has slashed interest rates on postal savings by half as part of its efforts to reduce interest rates on bank loans and deposits, and promote investment in private sector.
The Internal Resources Division of the Ministry of Finance on Thursday issued a circular regarding this with immediate effect.
The interest rate on one-year savings was reduced to 5 percent from 10.20 percent.
For two-year schemes, interest rate was cut to 5.50 percent from 10.70 percent while it was slashed to 6 percent from 11.28 percent for three-year schemes.
The depositors can withdraw profits from their postal savings after six months. In such case, interest rate would be 4 percent for one-year schemes, 4.50 percent for two-year schemes and 5 percent for three-year schemes, according to the circular.
Previously, the rates were 9 percent, 9.50 percent and 10 percent respectively.
The majority of banks have already implemented the decision to offer 6 percent interest rate on their Fixed Deposit Receipts (FDRs).
The banks are also expected to provide loans at 9 percent interest rate within a couple of months.
Last year, private banks agreed to set single-digit interest rate on their deposit and loan schemes.
On January 28 this year, the Association of Bankers, Bangladesh -- a forum of managing directors of banks -- decided to provide not more than 6 percent interest on FDRs from February 1.
Meanwhile, a finance ministry official said the government wanted to promote investment in private sector, and bring down interest rates on both FDRs and bank loans.
As the banks have already cut interest rates on FDRs, people would have rushed to open postal savings accounts if the government had not slashed the interest rate on the savings, the official added.
However, those who opened postal savings account before February 13 would get their profits based on previous interest rates, he added.
From the current fiscal year, the government has tightened the rules for savings instruments.
For example, the depositors will have to have tax identification number (TIN) and bank accounts for opening postal savings accounts. Besides, the government has slapped additional 5 percent tax on their profits.
These measures have led to a decline in the sale of government savings instruments.
People bought savings instruments worth Tk 5,433 crore between July and December in fiscal 2019-20. The amount was Tk 24,993 crore during the same period in fiscal 2018-19.
However, the 12 percent interest rate on savings certificates for more than three years and less than five years remained unchanged.
A finance ministry official said the government has tightened the rules and regulations so that only those having legal income can buy savings certificates.