SAVINGS INSTRUMENTS: FY25 net sales recover, but still negative

The net sales of savings instruments saw a marked recovery in FY25, ending the fiscal year with a balance of Tk 60.63 billion in the negative - a significant improvement from the negative Tk 211.24 billion recorded in FY24.

In June 2025 alone, net sales dipped by over Tk 1.69 billion as higher-yielding encashments continued to outweigh fresh investments, according to the Bangladesh Bank data.

This contrasts with May 2025, when net sales were more than Tk 15.37 billion.

Although June 2025 posted a decline, the drop was far less severe than in the same month of 2024, when net sales had plunged by Tk 33.81 billion - reflecting a notable ease in the contraction rate.

Over the July-May period of FY25, net sales stood at negative over Tk 58.93 billion, substantially better than the negative Tk 177.42 billion posted in the corresponding period of FY24.

Several factors, including high inflationary pressure, financial crisis, reduced profitability in banks, and challenging investment conditions, contributed to this slide.

The net sales of savings certificates are calculated by deducting the amount repaid for previously sold ones from the total sales.

The central bank data shows the total outstanding balance of savings instruments stood at Tk 338.49 billion in June 2025, down from Tk 346.26 billion in June 2024 - reflecting a year-on-year decline of around 2.24 per cent.

The government has slashed yield rates on savings certificates, dealing a blow to pensioners, elderly citizens, and widows who rely on these instruments for fixed income, especially amid high inflation.

According to a Finance Division notification issued recently, the revised rates took effect on July 1 and would remain valid through December 2025.

The cuts are part of the broader efforts to manage interest expenditures and align savings tools with the ongoing tight monetary policy.

Finance Division officials said the yield rates "will be reviewed again in January 2026, depending on inflationary trends and fiscal pressures".

The decline in the net sales of government savings instruments and the recent cuts in yield rates are likely to deepen financial stress for pensioners, small savers, and fixed-income groups as there are limited alternative investment opportunities, warns Dr M Masrur Reaz, chairman and CEO of Policy Exchange Bangladesh.

Instead of a sudden and sharp reduction in sales, the government could consider carefully devising its domestic borrowing strategy in a way that continues the emphasis on savings instruments to prioritise support for pensioners, fixed-income groups, and small-scale savers until the inflationary pressure eases and alternative savings and investment options are developed, he said.

"The reduction in returns comes at a time when inflation continues to erode real income. These tools are lifelines for pensioners, widows, and small savers, and the latest policy changes risk undermining their financial security," he told The Financial Express.

Dr Reaz also stressed that "savings instruments need to be restructured in a way that retains their attractiveness for small investors without disrupting macroeconomic goals."

"Otherwise, long-term confidence in public savings tools may erode," he added.

For the five-year Bangladesh savings certificate, the new annual yield is 11.83 per cent for the first slab (up to Tk 750,000) and 11.80 per cent for the second slab (additional investments), down by three basis points from 11.83 per cent.

The first-year effective yield, previously 10.13 per cent, has now been revised down to 9.74 per cent for this instrument. The second-slab yield has been revised down from 10.11 per cent to 9.72 per cent.

For the three-monthly profit-based savings certificate, the first slab's annual yield is 11.82 per cent, down from 12.10 per cent in earlier reviews. The second slab has been revised to 11.77 per cent.

The pensioner savings certificates' first-year returns have been slashed from 10.23 per cent to 9.84 per cent and the second slab from 10.11 per cent to 9.72 per cent.

The family savings certificates' first-year yield has declined from 10.20 per cent to 9.81 per cent. The second slab saw a cut from 10.11 per cent to 9.72 per cent.

The post office fixed deposit's first-year returns have been lowered from 11.00 per cent to 10.65 per cent, and the second slab to 10.60 per cent.

The government launched an online database named "National Saving Certificates Online Management System" and also made e-TIN and the national identity card mandatory for savers in 2019.

sajibur@gmail.com