Institutions barred from investing in savings schemes
KARACHI: The government on Tuesday restricted financial institutions from investing in the national savings schemes (NSS) products after July 1.
The move aims to discourage financial institutions across the country from parking funds in the NSS products and divert these investments towards other long-term instruments such as the Pakistan Investment Bonds and stock market etc.
An official notification issued by the Finance Division said, “in light of decision of the committee constituted to finalise plan for elimination of institutional investors from NSS products and recommendation of the State Bank of Pakistan, the competent authority has been pleased to direct that institutional investment in NSS shall be discontinued with effect from July 1.”
The notice further said the “Central Directorate of National Savings (CDNS) is requested to take further necessary action accordingly.”
Various pension and provident funds invests large sums in the NSS products. These funds can be instead be invested in the capital markets.
The government’s move can divert these funds towards the capital markets such as the stock market and government bonds.
The CDNS’ core purpose was to market instruments for the general public allowing them to earn maximum returns from their investment. However, due to their lucrative rates, institutional investors also invested heavily in these instruments securing returns well above that of the market.
Latest data released by the CDNS on June 25 showed it achieved the net collection target of Rs375 billion in the ongoing fiscal year.
The directorate had set the annual collection target of Rs352bn for the fiscal year 2019-20 as compared to Rs350bn in the corresponding period last year to enhance and promote savings culture.
Published in Dawn, July 1st, 2020
