There have been news items and queries from the press on the slow growth rate in the National Savings investments during the first half of CFY 2017-18. National Savings found it appropriate to issue this press release to put things in perspective.
This has been clarified that there have been no across the board withdrawals in National Savings Schemes (“NSS”) as mentioned in some sections of the press. The main exit in investments have been witnessed in 3 year tenor schemes where the profit rates are linked to the primary auctions of Pakistan Investment Bonds (“PIB”) of relevant tenor, like all other NSSs.
In the last six months consecutive bids of PIBs auctions have been rejected whereas no bid were received for six and twelve months Treasury Bills (“T-Bills”) after September 17, hence, the profit rates of NSS remained unchanged for the last one year (last revised in February 2017). While, on the other hand, the profit rates in the market, including the secondary market rates for PIBs, have been increasing. Thus, created a temporary rate anomaly in the market and exodus of institutional investors funds from National Savings in medium term deposits, and slow growth in investments otherwise. The main welfare scheme – Bahbood Savings Certificates (“BSCs”) – which constitutes 23% of the total portfolio of National Savings and offers upto 200 bps preferential rate than the product of National Savings of similar tenor, have been registering increasing investment trend, despite the fact that this schemes is facing stiff competition from the microfinance banks.
Weakening of Pak Rupee has been identified in press as one of the possible reasons behind the low savings mobilization. It is clarified that the anticipated depreciation of Pak Rupee against the US Dollar is not the reason for lower savings growth rate. National Savings (or CDNS) investors are mainly individuals who have conservative investment outlook and do not risk to arbitrage for the short-term gains. The flight of funds from National Savings has predominantly taken place in case of institutional investors – the employee trust funds – which are typically long term players and do not exit the investments frequently either. They are not allowed or refrain from foreign currency investments/ exposures.
With respect to the negative growth rate in savings mobilization for the last three years, CDNS would like to clarify that it has anticipated this situation in view of the falling interest rate environment; therefore, the fall in growth rate was accounted for in the projections and accordingly included in the Budget Books. CDNS is proud to say that it has been meeting all its targets set by the Finance Division without fail. In fact, it has been exceeding it’s own targets and making up for the shortfall in the other distribution channels, particularly the Commercial Banks which have been showing a continuous negative trend for the past three years. On the other hand, despite lowest interest rates in decades, National Savings has raised Rs. 622 Billion gross receipts in the last six months of CFY 2018, which is highest number of the gross receipts in the similar period over the last three years.
To arrest the situation of falling investment growth rate, National Savings is making profound efforts to compete on the bases of customer service delivery instead of the profit rates only. National Savings has recently established a Computerized Complaint Resolution System through which complaints are monitored till their final resolution through a system generated tracking ID. Along with this, a state of the art Call Center has been established through which customers can register their complaints. Moving further into the digital era, National Savings has launched a non-financial version of mobile application called “Qoumi Bachat Digital” which has enabled customers to view their profits, investments in the certificates and accounts, get notifications on the transactions, view transaction history and also save prize bond numbers to be searched in the Prize Bond draws. National Savings is launching a financial version of the mobile application along with Card Management System and Mobile Wallets for their esteemed investors within the next six months.
National Savings introduced Centralized Clearinghouse facility in January 2017 to the investors through which the cheque clearing time has been reduced from 7-10 days to only 1-3 days, and has allowed third-party payments from Saving Accounts in October 2017 using them as Operating Accounts like Commercial Banks which will help in retaining investments with CDNS and enhancing deposits in Saving Accounts (where outflow was ~Rs. 125 billion in CFY 2017-18).
There are at least four new products, including Sharia Compliant Product, Overseas Pakistanis Savings Certificates (“OPSCs”) which are being launched in next five months of CFY to help compensate for the reduction in existing interest rate sensitive schemes. OPSCs will not be issued to the certificates for onshore investors; the proposed OPSCs will only be offered for Overseas/ Non-Resident Pakistanis. Therefore, there’s no point in onshore investors “hoarding foreign currency” in anticipation of the issuance of the proposed OPSCs as eluded in one of the news items. The rate of return on the proposed certificates has not been finalized as yet. The products will only be issued once structure, launch plan and rules of the proposed certificates are formally approved by the Finance Division and the Federal Cabinet.
Shuhadah Families Welfare Account and BSC for Persons with Disabilities were announced in Federal Budget 2017-18 and are being launched in a record time. Some newspaper claims that these products having been under discussion for the past one year is not fair. It must be appreciate that the NSS have far reaching impact on the general public and; therefore, these products must be launched with great care and after thorough due diligence.
Through new products and modern initiatives, discussed above, National Savings aim to compete in the market on the superior customer service delivery and the offering products with sticky investments instead of competing on profit rates alone.