Bangladesh's Finance ministry has reduced the FDR rate of the post office by almost 50% with a view to promoting deposit mobilization through the banking channel. Countrywide, more than 8,500 post offices are allowed to collect deposits through two types of accounts - Post Office Savings Bank (POSB) Ordinary A/C and POSB Fixed Deposit. The changes in the rates are as follows:
| Accounts | New Rate | Previous Rate |
|---|---|---|
Post office Savings Bank - Ordinary A/C | 5.0% | 7.5% |
| ||
Post office Savings Bank Fixed Deposit – 3 years Period | 6.0% | 11.28% |
Profit if not withdrawn after each 6 months |
|
|
1st year | 5.0% | 10.2% |
2nd Year | 5.5% | 10.7% |
3rd Year | 6.0% | 11.28% |
Profit if withdrawn after each 6 months |
|
|
1st year | 4.0% | 9.0% |
2nd Year | 4.5% | 9.5% |
3rd Year | 5.0% | 10.0% |
Source: Bangladesh Finance Ministry
Analyst comments
- These postal savings constitute c16% of the total National Savings Directorate (NSD) instruments. We think this is the first move towards adjusting the higher risk-free rate.
- In recent times, deposit collection from POSB was the highest among all the NSD instruments sales. In the first six months of FY2020, total net NSD instrument sales were BDT54,330mn (USD639mn) whereas the total deposit in POSB was BDT79,350mn (USD934mn), which suggests all other instruments sales were negative (NSC sales a negative USD375mn).
- We think this a good move from the government to control NSC sales. We expect more money to flow into the money market and thus banks to get deposits at a lower rate.
Table 1: NSD Instrument Outstanding (December 2019)
| Instruments Type | Amounts in BDT mn | Amount in USD mn | Composition |
|---|---|---|---|
National Savings Certificate | 2,317,798.2 | 27,268.2 | 78.6% |
a) 5-year Bangladesh Saving Certificate | 356,669.2 | 4,196.1 | 12.1% |
b) Family Savings Certificate | 1,029,345.3 | 12,109.9 | 34.9% |
c) 3-month interest-bearing saving certificate | 714,412.9 | 8,404.9 | 24.2% |
d) Pensioner Savings Certificate | 217,370.8 | 2,557.3 | 7.4% |
Savings Bond | 141,908.1 | 1,669.5 | 4.8% |
a) Bangladesh Prize Bond | 5,822.6 | 68.5 | 0.2% |
b) Wage Earners Development Bond | 111,171.6 | 1,307.9 | 3.8% |
c) US$ Premium Bond | 2,867.8 | 33.7 | 0.1% |
d) US$ Investment Bond | 22,046.1 | 259.4 | 0.7% |
Post-office Savings Bank | 478,044.3 | 5,624.1 | 16.2% |
a) General Account | 31,847.3 | 374.7 | 1.1% |
b) Fixed Account | 445,818.6 | 5,244.9 | 15.1% |
c) Bonus Account | 378.4 | 4.5 | 0.0% |
Others | 9,261.2 | 109.0 | 0.3% |
Total NSD Instruments Outstanding | 2,947,011.8 | 34,670.7 | 100.0% |
Source: Bangladesh Bank, National Savings Directorate
Table 2: NSD Instrument net sales in FY2020 (6 months to December)
| Instruments Type (Amounts in BDT mn) | Jul - Dec, FY 2020 | Jul - Dec, FY 2019 | Growth |
|---|---|---|---|
National Savings Certificate | -31,832.0 | 203,266.0 | -115.7% |
a) 5-year Bangladesh Saving Certificate | 20,974.0 | 25,614.0 | -18.1% |
b) Family Savings Certificate | -36,231.0 | 77,154.0 | -147.0% |
c) 3-month interest bearing saving certificate | -27,690.0 | 84,599.0 | -132.7% |
d) Pensioner Savings Certificate | 11,115.0 | 15,899.0 | -30.1% |
Savings Bond | 6,800.0 | 5,789.0 | 17.5% |
a) Bangladesh Prize Bond | 253.0 | 196.0 | 29.1% |
b) Wage Earners Development Bond | 6,366.0 | 5,535.0 | 15.0% |
c) US$ Premium Bond | -32.0 | -93.0 | -65.6% |
d) US$ Investment Bond | 213.0 | 151.0 | 41.1% |
Post-office Savings Bank | 79,350.0 | 40,872.0 | 94.1% |
a) General Account | 3,257.0 | 2,256.0 | 44.4% |
b) Fixed Account | 76,093.0 | 38,616.0 | 97.1% |
c) Bonus Account | 0.0 | 0.0 | 0.0% |
Others | 14.0 | 9.0 | 55.6% |
Total NSD net Sales (Jul-Dec FY2020) | 54,332.0 | 249,936.0 | -78.3% |
Source: Bangladesh Bank, National Savings Directorate