The government's net borrowing through selling savings tools dropped by more than 71 per cent to Tk 144.28 billion in FY '20 from Tk 499.39 billion a year ago, according to official figures.
A drastic fall in the sales of the savings instruments mainly due to the automation of its selling process amid COVID-19 led to such decrease in the government's borrowing from the source.
As a result, the government borrowing from the banking system more than doubled in FY '20 to partly finance its budget deficit.
Its borrowing from the banking system rose by nearly 109 per cent to Tk 722.46 billion as on June 30 last from Tk 345.87 billion in the same period of the previous fiscal, according to the Bangladesh Bank (BB)'s confidential report.
The bank borrowing of the government, however, was lower than revised targets for FY '20.
Earlier, the government increased its bank borrowing target to Tk 824.21 billion for the FY '20 from the original target at Tk 473.64 billion, according to the budget documents.
Falling trend in sales of national savings certificates and lower revenue collection have pushed up the government borrowing from the country's banking system in FY '20, officials explained.
The government has already targeted a 'hefty' borrowing from the country's banking system to finance the budget deficit partly for the current fiscal year.
As per the budget documents, the government's bank borrowing is set to jump by over 79 per cent to Tk 849.80 billion for the FY '21 from Tk 473.64 billion a year ago.
Under the arrangement, the government will borrow Tk 536.54 billion issuing long-term bonds while the remaining Tk 313.26 billion through treasury bills (T-bills).
Finance ministry earlier slashed the net borrowing target from the NSCs by nearly 56 per cent or Tk 150.76 billion to Tk 119.24 billion from the original target of Tk 270 billion for FY '20.
On the other hand, net borrowing through selling savings instruments stood at Tk 144.28 billion in FY '20 which was 21 per cent higher than the Tk 119.24-billion revised target.
Net sales slumped in FY '20 than FY '19 due to the automation of its selling process and submission of tax identification number (TIN) certificates, according to officials.
Talking to the FE, a senior official of the Directorate of National Savings Bangladesh said coronavirus has also pushed down the net sales of savings tools in recent months.
The sales of savings certificates normally increase during the May-June period of each fiscal year as taxpayers seek to get income-tax benefits.
Net sales, however, rebounded in June at Tk 34.17 billion, up from last year's Tk 32.08 billion, according to the official data.
The government has already set its borrowing target from savings instruments at Tk 200 billion to meet the budget deficit partly for FY '21.
"We cannot understand whether the borrowing target will be achieved by the end of this fiscal," the official of the directorate said in reply to a query.
The government has already installed an online database under the Public Expenditure Management Strengthening Programme to see whether savers abuse the savings opportunity exceeding the investment limit or make 'benami' (fictitious) investments.
Under the programme, savers will be required to produce their national identity cards, bank accounts, mobile numbers and TINs while buying savings tools and bonds.
Even those who have already invested in such schemes will need to submit similar documents to draw yields or encash matured investments.
Besides, the savers will need to make payment in cheque for purchasing saving certificates of over Tk 50,000.
Four savings tools-Five-Year Bangladesh Sanchayapatra, Three-Monthly Profit Bearing Sanchayapatra, Family Savings Certificate and Pensioner Sanchayapatra-are much popular among savers in Bangladesh.
The schemes pay around 11 per cent annualised profits, whereas the weighted average interest rate on bank deposits at 5.06 per cent.
There are four term-savings bonds-Bangladesh Prize Bond, Wage Earner Development Bond, US Dollar Premium Bond and US Dollar Investment Bond.