Set to launch saving certificates in US dollars, an attractive opportunity to encourage overseas Pakistanis
Central Directorate of National Savings (CDNS) is a top-ranking financial institution offering retail government securities and savings products (known as national savings scheme) to small savers through expansion product mix. The institution has investor base of seven million and portfolio, which is around 30 percent of total banking deposits of nearly Rs12 trillion.
CDNS share in domestic debt of government is around 19 percent. Most of its products are designed for low-income section of the society.
Central Directorate of National Savings (CDNS) raises interest rates up to 1.09 percent for national saving schemes. According to CDNS, interest rates for Behbood savings certificates and pensioner benefit accounts had been increased by 0.72 percent to 10.08 percent, defence savings certificates by 0.56 percent to 8.10 percent, special savings certificates by 0.77 percent to 6.80 percent. Interest rates for regular income certificates were by 1.09 percent to 7.632 percent and for saving account it was raised 0.55 percent to 4.50 percent.
Three-month short-term paper interest rates have been raised by 0.32 percent to 5.92 percent, for six-month papers by 0.42 percent to 6.04 percent and 0.61 percent to 6.25 percent for a one-year paper.
Government announced up to 1.09 percent increase in rates of returns for national savings certificates, breaking a 14-month spell of unchanged profit margins for the investment avenues mainly tapped by low-income groups.
The National Savings Scheme (NSS) has revised the rate of returns on its different products ranging from 0.56 percent to 1.09 percent.
One billion dollars from Pakistan’s expatriates
Government planned to mobilize up to one billion dollars from Pakistan’s expatriates via savings certificates scheduled before the end of the current fiscal year. It has invited national and international banks for managing the issue.
Overseas Pakistani savings certificates are aimed to launch before the close of this fiscal year. In the beginning certificates would be launched in the Gulf Cooperation Council market and later they would be launched in other countries in different phases.
National Savings has already appointed a consortium of Ernst and Young, Haidermota and Company and Al Tamimi And Company as their financial and legal advisers for the structuring of the proposed certificates.
CDNS recognizes overseas Pakistanis as a powerful resource for the national development and has designed the distinctive product to target the savings, which are coming from informal channels.
Pakistan received $14.6 billion in remittances from overseas Pakistanis in the first nine months of the current fiscal year, marginally up four percent over the corresponding period a year earlier.
Pakistan’s domestic savings had dropped from 9.7 percent of GDP in fiscal year 2011 to 7.5 percent of GDP in fiscal year 2017.
Saving through customer services
National Savings, comprises about a third of the banking deposits, is Pakistan’s leading institution to mobilize savings.
National Savings has been meeting, in fact, exceeding, and all its targets every year to make up for the shortfalls from other sources.
It is also making concerted efforts to diversify its product-basket in order to include untapped, less rate-dependent sectors, such as Islamic on the domestic front and attracting external savings from overseas Pakistanis.
Customer reach and convenience are being improved substantially by the use of technology.
The National Savings portfolio stood at Rs3519 billion as of January 2018. Out of the total portfolio, 84 percent is invested by individual investors. 16 percent of the portfolio is invested by the institutions, which are basically the welfare funds.
Banks, insurance companies and mutual funds are prohibited from investing in the National Savings. The major focus of National Savings is to target the individual investors in accordance with its objective to arouse the habit of thrift among masses and remain a formidable vehicle for financial inclusion.
National Savings is very much aware of the possible amount of savings in Pakistan, which could be doubled in the next three to five years, if certain aggressive structural changes are undertaken.
Pakistanis are in general showy people and they enjoy gorgeous lifestyle and tend to spend more than save unlike other regional countries such as India, Bangladesh and Sri Lanka.
National Savings is making efforts to mobilize savings through accelerating its customer service by introducing technological initiatives instead of interest rates only.
It is totally pledged and currently focusing on digitization. Out of 376 National Savings Centers, we have thus far digitized 223.
The recently-launched complaint resolution system and call center will help customers resolve their complaints in the most efficient manner.
Customers will soon get to use financial version of Qoumi Bachat Digital, which is our mobile application.
Initially, the certificates will be launched in the GCC market. Later, OPSCs will be launched in other countries, in different phases. They will be scrip-less and will be offered in both US dollars and Pakistani Rupees.
It is hoped to raise between $500 million and $1 billion in the first year of launch. The operational aspects of these certificates will be managed by a third party.
The current branches are sufficient to serve the customers. However, the Alternate Delivery Channels will remain the backbone to acquire more customers in a most cost effective way.
Normally, throughout the world, the saving institutions, like National Savings as an attached department of the Ministry of Finance, do not operate at branch level. It is worth mentioning that National Savings is perhaps the only organization of its kind globally that has its own branch network. It also has distribution relationships with Pakistan Post Office, commercial banks and the State Bank of Pakistan.
More than 75 percent of the savings are generated by National Savings itself through its savings centers spread all across Pakistan, at only cost of 0.34 percent per annum. This is the most cost-effective source possible.
National Savings aim to target other untapped markets through the use of technology, which is being developed to advance outreach in rural areas to the next level. National Savings is also considering fostering relationships with its existing organizations like Pakistan post, and adding more partners like courier companies, etc. to extend its outreach, particularly in the far-flung areas of the country.
Planning to launch saving certificates in us dollars
Central Directorate of National Savings (CDNS) is planning to launch saving certificates in US dollars to encourage overseas Pakistanis to invest this financial instruments.
This dollar based security is likely to be launched in the last quarter of this fiscal year. It is estimated that about one billion dollars would be invested in this security by overseas Pakistanis. The tenure of such certificates will be 3 to five years.
National Savings has developed a unique product named as Overseas Pakistanis Savings Certificates (OPSCs) which aims at targeting the remittances from non-banking channels and the Savings which are not channelized in Pakistan currently and held back in the resident countries of the Overseas Pakistani.
Such an initiative of National Savings will provide Overseas Pakistanis an attractive opportunity to park their hard-earned savings in a more reliable and secure Government-backed securities in their home country.
Official remittances will also increase from current $20 billion mark. Overseas Pakistanis Savings Certificates (OPSCs) envisaged as the Pakistan’s first of its kind risk-free and script-less security for Overseas Pakistanis on tap basis, like all other retail products of CDNS/Government of Pakistan, which will be mutually helpful to both the Government and the Overseas Pakistanis. It is proposed to be offered in both the US Dollars and Pakistan Rupees.
The proposed tenor will be 3 and 5-year with monthly profit. While the custodian of the product will be CDNS as it is for all the other retail products of the Government.
The product is proposed to be launched initially in the Gulf Cooperation Council (GCC) and then subsequently be rolled out in UK and USA markets and in third phase across the globe, keeping in view the regulatory requirement of the market.
National Savings estimates to fetch initial investment in the range of $550 million and $1,200 million per annum on the basis of 1/4th of 4.5 million. Overseas Pakistanis living in the initial target market (GCC) if they invest only a minimum investment of $500. It is expected that the OPSCs will send immense positive vibes throughout Pakistani Diaspora spread around the world. The remittances will enhance from the banking channels further through this initiative.
Innovative solutions to safe-guard savings
The product offering will make them feel that the government back home cares for them and is coming up with innovative solutions to safe-guard their savings by providing both secure and lucrative investment platforms.
National Saving has completed automation and computerization of its 223 centers to facilitate investors and ensure more effectiveness in execution of routine work.
More than 200 such centers are now centrally connected. The sources said present government under ambit of National Savings had taken steps to attract more investment in National Savings Schemes and to facilitate investors and this included launch of non-financial version of Mobile Application i.e. Qoumi Bachat Digital.
The National Savings has become first-ever non-bank member of Banking Clearing House System which has reduced cheque processing time from 7-10 days to 1-3 days only.
The Department has also launched state-of-the-art Call Center, which is backed by a Computerized Complaint Resolution System and added Call Centre can be accessed through a dedicated number and all complaints of customers are tracked through system generated complaint ID till their final resolution.
The other steps included mobile application enabled National Savings to view up-to-date Certificate and Account Balances, access product-wise investment details, get SMS and email alerts on any transactions in accounts/certificates, view transactional history and account statements, search draw results of prize bonds and save prize bond numbers for future draws.
Permission for Third-Party Payment against National Savings Withdrawal Slips was another step through which customers of Savings Account can now pay their routine expenditure like utility bill, school fee etc. to beneficiary directly.
Martyrs welfare account
The National Savings has also developed schemes for family members of martyrs called Shuhada Family Welfare Account (SFWA) and extension of Bahbood Savings Certificates (BSCs) to Persons with Disabilities (PwDs).
Structuring of a new scheme for Non-Resident Pakistanis through Overseas Pakistanis Savings Certificates (OPSCs), consideration and establishment of a Shariah Window of National Savings to launch Islamic Schemes and launch of Rs 40,000 Premium Prize Bonds (Registered) with dual features of both prize money and bi-annual profit payments were the other major steps introduced.
The government has formally launched a savings scheme aimed to benefit disabled persons at par with Bahbood Savings Scheme.
It may be recalled that the government had made an announcement about the scheme in the budget 2017-18. Accordingly, National Savings was entrusted with the task to frame rules under the guidance of Finance Division.
In line with other special schemes for those investing via National Savings, disabled people will get higher margins for their investments and savings. The exact amounts have not been announced yet.
National Savings has already been directed to implement the scheme. It is estimated that around 192,000 disabled persons would benefit from the scheme. The scheme, it may be added also fulfills the objective of financial inclusion of the disabled persons.