Pakistan national savings rates slashed amid falling interest rates

Continuous falling interest rates in Pakistan have compelled the National Savings Centre to clip profit rates in the range of 22-200 basis points (bps).

The new rates will be effective from January 31.

According to a document received from the National Savings Directorate, Regular Income Certificate saw a trimming of 22bps to 11.88%, Behbood, Pension, and Shuhada Certificates profit rates fell by 30bps to 13.62% and Savings Account saw clipping by 200bps to 11.50%.

Other savings certificates remained unchanged such as Special Savings at 11.60%, Sarwa Islamic Certificates with a period of one year, three years, and five years at 10.44%, 10.92%, and 11.52%, respectively. Meanwhile, Sarwa Savings Account was pegged at 10.44%.

The profit rates on the saving certificates have been declining since the start of 2024 as treasury benches at banks felt the policy rate would be slashed sharply and pressure mounted. During the span of a year, profit rates on Behbood, Pension and Shuhada Certificates saw a decline of 246bps from 16.08% recorded in December 2023.

Similarly, the on Regular Income Certificate fell by 324bps from 15.12% in December 2023 while a peak rate of 16.08% had been recorded in October 2023.

Moreover, rates on other products dropped in range of 200-900bps.

Investors anticipated rate cuts, which led to falls in cut-off yields on Pakistan Investment Bonds or PIBs. Any movement in long-term bonds has been linked to profit rates of savings certificates.

As of December, total investment parked in savings certificates amounted to around PKR 2,700 billion. Investors have bought PKR 334 billion worth of bonds while another PKR 58.6 billion worth of registered bonds have been issued in the name of individuals.