Savings instruments sales plunge 41pc in July amid rate cuts, inflation

The net sales of savings instruments dropped sharply to Tk 12.93 billion in July 2025 from Tk 21.87 billion in the same month a year earlier, reflecting a year-on-year (YoY) fall of about 41 per cent, according to Bangladesh Bank data.

Economists and policymakers attribute the decline to multiple factors, including stubbornly high inflation, tighter liquidity, reduced bank profitability, and lower yield rates on savings certificates.

Net sales of savings certificates are measured by deducting repayments against earlier investments from fresh sales. In June alone, net sales dipped by over Tk 1.69 billion as encashments outpaced new purchases.

Despite this setback, the fiscal year 2024-25 (FY25) showed some recovery compared to the previous year. Net sales closed FY25 with a negative balance of Tk 60.63 billion - an improvement from the Tk 211.24 billion deficit posted in FY24.

Still, the central bank's latest data show total outstanding balances of savings instruments stood at Tk 3.40 trillion in July 2025, down from Tk 3.48 trillion a year earlier, a 2.3 per cent decline.

SAVERS SHIFT BEHAVIOUR

"The 41-percent fall in July shows how inflation and reduced yields are reshaping household savings behaviour," said Dr M Masrur Reaz, chairman of Policy Exchange Bangladesh. "More people are encashing than reinvesting, weakening a traditional source of government financing."

He warned that while yield cuts may reduce fiscal pressure, they risk hurting pensioners, elderly citizens, and widows who rely on fixed returns, especially during a period of high inflation.

YIELD CUTS IN EFFECT

The Finance Division recently slashed yield rates across several savings schemes, effective from July 1 through December 2025. Officials said the rates would be reviewed again in January 2026, depending on inflationary pressures and fiscal needs.

Under the revised structure, the five-year Bangladesh savings certificate now offers 11.83 per cent for investments up to Tk 0.75 million and 11.80 per cent for higher slabs. The effective first-year return has also been reduced, coming down from 10.13 per cent to 9.74 per cent.

The three-monthly profit-based savings certificate has seen similar cuts, with the first slab yield dropping to 11.82 per cent from 12.10 per cent. Pensioner savings certificates have also been affected, as first-year returns were revised down from 10.23 per cent to 9.84 per cent.

Family savings certificates now yield 9.81 per cent in the first year, compared to the earlier 10.20 per cent, while post office fixed deposits have been revised with the first-year return lowered from 11 per cent to 10.65 per cent.

Dr Reaz noted that aligning savings schemes with tighter monetary policy makes macroeconomic sense but could push savers into riskier or informal channels.

He suggested developing a longer-term strategy to mobilise household savings by strengthening capital markets and diversifying investment products beyond traditional certificates.

He also pointed out that while digitalisation has improved transparency, small savers less comfortable with online systems may have been discouraged.

The government introduced the "National Saving Certificates Online Management System" in 2019, making e-TIN and national ID cards mandatory for investors.

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