Investing gratuity funds in government-offered saving schemes barred

Regulators are shutting the door on the investment of gratuity funds in saving certificates to curb sales of schemes that are increasing the state coffer’s debt burden.

The central bank wrote to the banks on Monday telling them that funds from gratuity cannot be invested anymore in schemes offered by the Directorate of National Savings (DNS).

Analysts say due to a sluggish and somewhat fluctuating capital market and lower interests offered on bank deposits, investors consider DNS schemes as a ‘less-risky investment option.'

The hike in sales of DNS-offered scheme is adding to the government’s debt burden.

Net sales of DNS saving schemes in the 11 months of FY 2015-16 stood at Tk 300.92 billion, up 13.3 percent from the amount during the same period over the previous fiscal.

Amid the hike in sales, in May 2015, the government lowered interest rates, which, however, failed to put a leash on sales.

The Bangladesh Bank instruction to the banks referred to the savings certificate rules to say there is scope of investing gratuity money in five-year savings certificates and the option was actually not open beforehand either.

A central bank official told bdnews24.com that the instruction was issued following specific allegations of gratuity fund being used to buy savings certificates.