The downward revision of the returns on the National
Saving Schemes (NSS) has become a talking point among the retired and
the senior citizens that were relying heavily on the earnings from these
schemes for their monthly expenditures.
Majority of the senior citizens whose strength is
running in millions found it safe to invest in the national saving
schemes to carry out their daily expenses respectfully as they are
unable to take physical exertions to earn their livelihood due to old
age. A large group of the retired people were of the view that the
government after certification of the age of over 60 years should allow
special incentives to the senior citizens as a part of the poverty
alleviation programme launched by the present government.
On the other side, the banking sector in Pakistan was
suffering due to attractive rates of returns on these saving schemes as
compared to the rates offered by the banks on their deposit schemes.
These schemes stated to be responsible for narrowing down the profit
margins of the banking sector were also being held responsible for the
winding up of Pakistan operations of various foreign banks.
According to official quarters, the decision for
downward revision of the returns on the national saving schemes has been
taken due to three reasons. The first was that revisions from now onward
take place half-yearly. New rates of return on the savings will be
announced in advance for the investment purposes in the forthcoming six
The second reason was that these rates would not have
retrospective effect. These will not rule the contracts previous to that
period. This means that all those investments contracted before the
enforcement of new rates will be governed by the tariff that prevailed
in that period and will run through for the agreed period.
The third was that the NSS rates were very high when
compared with those prevailing in the private sector and were thus
hurting the interest of the banks. The rate of inflation and other
factors that lead to the determination of profit rates, the NSS had
since then become under control and against all expectations, had not
"jumped down into the unknown". Hence, there was need for
their revision to bring them to the realistic level so that the private
sectors depositors and lenders felt comfortable.
Currently, the directorate of national saving scheme
is administering 6 saving schemes, five of them carry various rates of
profits. The 6th is the National Prize Bonds.
The Directorate of NSS is managing following 6
Special saving certificates.
These are contracted for three years and a varied slab of profit is
applicable. The profit is paid every six months. These are available in
eight denominations with the lowest at Rs500 running to the highest
Rs100,000 but there is ceiling on the amount of investment. However, it
will earn the rate during the three years at the profit prevailing in
the half year when investment was contracted.
THE DEFENSE SAVINGS CERTIFICATES:
are valid for ten years and have a promised increase at maturity like a
certificate of Rs500 becomes of Rs555 and so on. These certificates are
sold with the profits they will earn on maturity published on them and
so not fluctuate with the half-yearly revisions.
MONTHLY INCOME SCHEME:
its income not exceeding Rs1000 is exempt from the deduction of tax at
on which the profit of seven per cent will be calculated on the minimum
monthly balance. This will be the rate for deposits received after July
1 last. Neither the administrators were asked nor they volunteered a
statement if the profit under this head was subject to the deduction of
REGULAR INCOME CERTIFICATES:
This scheme is spread of 84 months or 7 years. These earn a profit of
Rs880 per month on each block of Rs100,000 on the rate enforced after
July1. These are exempt from compulsory collection of Zakat but subject
to deduction of 10 per cent wealth tax. The period previously was five
years and at the current conditions offered by some banks, period-wise
the NSS investment will be heavy. The Habib Bank has a minimum of three
PRIZE BONDS SCHEME:
This scheme for which a monthly draw is made for the winners of special
The official quarters while justifying the downward
revision of tariff, said that it has been made on the ground that
similar action had been taken in Sri Lanka and India where the rates
have been slashed by quite a big percentage. In India, the rates have
been brought down mostly by two per cent. The only exception was the
Post Office Savings where the profits have come down from 4.5 per cent
to 3.5 per cent.
Under the new slabs, the gross income on Defence
Savings Certificates at maturity will be 11.61 per cent per annum and
10.59 per cent net on average compound: for the special savings
certificates of three years, it will be 10.50 per cent net, the Savings
that is a running account will earn 7 per cent per annum gross and 3.8
percent net. Mahana Amadani Account of seven years minimum deposit
period the gross and net at average compound on maturity, have been
calculated at 10.41 per cent per annum.