52 pc investments in bond have no legal source
Lenin Rahman: Huge amount of black money are whitening through buying of National Saving Certificates (NSCs) mainly for convenient way for the vested groups as they need not provide any authentic prove for source of income and additional tax to the government.
The lion share of the investment on national bonds is ‘black money’, said the sources adding the vested groups are gaining profit through investing NSCs. Very cunningly, these groups are attaining profit instead of paying tax to the government exchequer and huge amount of black money are turning as white or legal money.
Banking sources said, still they did not know the sources of money are investing in national saving certificates. Some 52-60 percent source of fund which had invested on government bonds is unknown, they claimed.
Approximately, the net investment on the national saving certificate stood at Tk 260 billion. In this calculation, above Tk 150 billion illegal or black money become white through selling of national saving certificates since the independence of the country.
Talking to the Daily Industry yesterday, Md Ehsan Khasru, Managing Director and Chief Executive Officer of Farmers Bank told that most of the fund which is investing in government securities has no source of fund.
“Though, the banks are maintaining an authentic know your customer (KYC) policy to take deposit but, the proper scrutiny regarding source of income or source of fund is not conducting in National Savings Bureau. So, there is possibility to invest the black money on national saving instruments”, Khasru said.
He has underscored the need for strengthening and maintaining proper data of the investment in national bonds to prevent ill-gotten resources.
The government is providing higher profit than the deposits of private commercial banks, because the conception of national saving certificate was introduced to assist the retired service holders across the country, he mentioned.
When a client invests in national bonds, bankers deliberately avoid additional question or query for his investment. The investment on national bonds is secure to consider this to the vested people, he observed.
Some people are investing huge money in national bonds but did not maintain proper and authentic data regarding the source of income, he said adding in the recent years the selling of NSCs are higher from the selling target of government due to higher rate of interest.
“It is time befitting to think on the investment on national bonds to tackle the illegal money transaction. Apart from this, higher selling of national bonds is hindering private banks to strengthen its deposit collection target”, Ehsan Khasru said.
Quazi Osman Ali, Managing Director of Social Islami Bank Limited (SIBL) said that the rate of national saving certificate is higher than the investment schemes of commercial banks; as a result, the general depositors are investing their money on government bonds.
The commercial banks are failing to collect deposit for lower deposit rate on their saving instruments, he observed. A good number of private commercial banks are facing severe liquidity crisis and provision shortfall in recent time. The interest rate of government instrument should reconsider to lower comparing the commercial banks, he added.
Mohammad Shams-Ul- Islam, Managing Director of Agrani Bank underscored the need for reducing Advance Deposit Ratio (ADR) to mitigate the corporate deposit craziness. The new government will undertake rational decision on the rate of national bonds, he hoped.
Khondker Ibrahim Khaled, former deputy governor of Bangladesh Bank said that national saving certificate is the social safety net instrument of the government.
The higher interest rate or profit is not concern here but the source of income should be cross checked whether it is legal or illegal. He suggested for knowing the source of fund to invest in the national bonds so that no one can cross the investment ceiling.
Talking on the black money investment on national bonds, Ibrahim Khalid said, the possibility of illegal money may occur due to lack of proper investigation of the source of income.
The bank should make a strong monitoring team to verify the source of money on the investment of national saving certificate for preventing illegal investment of black money.
According to finance ministry, the amount of black money is within 45 percent to 81 percent of Bangladesh’s gross domestic product. So, the black money investment on national saving instrument is rational.
Experts, however, suggested the central bank to make a central monitoring team to monitor the investment on national bonds to stop illegal money whitening.
Banking experts have expressed their concern on the government decision to increase deposit rates of national savings certificates (NSCs) from the rates of commercial banks because such policy will hamper the growth of the private sector. The steady growth of the private sector is crucial for attaining a vibrant and sustainable economy, they pointed out.
Already, a good number of private commercial banks are facing liquidity crisis for inadequate deposit, default loan and provisional shortfall, banking sources said.
The net investment on national savings certificates during the first five months (July-November) of the current fiscal 2018-19 stood at Tk 21,661.93 crore due to higher interest rates.
The net sale of the national saving instruments was Tk 21,172.07 crore during the corresponding period of the last fiscal 2017-18, according to the data Bangladesh Bank.
In this backdrop, the government has set target to sell NSCs amounting at Tk 26,197 crore for the current fiscal.
Experts pointed out that higher rate of government saving instruments are hindering to attract investors in commercial banks saving schemes. Actually, the government savings certificates and tools are a component of the government to borrow from the banking sector, said experts.
According to Department of National Savings, one depositor can invest up to Tk 45,00,000 to Paribar Sanchaypatra and this scheme typically provides a return of around 12 percent annual interest. The Pensioner Sanchaypatra for semi-government employees also allows similar profit returns. The depositors’ can invest a maximum amount of Tk 600,000 to quarterly profit-based savings and the profit margin is around 11 percent. Wage Earner’s Savings Certificates are providing around 11 percent profit for the depositors.
On the other hand, the private commercial banks (PCBs) are now offering officially 5- 6 percent profit on their deposit schemes as per the instruction of the central bank.