Lower interest rates on savings certificates to burden low-income people

For a long time, savings certificates have been considered a safe and reliable investment option for people with limited income in Bangladesh. Especially for salaried individuals, pensioners, housewives, and families of expatriates, savings certificates are an economically supportive tool. But in recent times, the government’s continued reduction of interest rates on savings certificates is conveying a message of financial uncertainty for these people.

According to news published in the media recently, the profit rate on savings certificates has been reduced for the next six months. The decision comes into effect from July 1. As per the new rate, the maximum interest on savings certificates will be 11.98 percent and the minimum will be 9.72 percent. Victims believe that the reduction of interest rates on savings certificates on the first day of the fiscal year is bad news for the elderly, retirees, and people with limited income.

In all welfare-oriented states of the world, there are financial security arrangements for the elderly, the incapacitated, and retirees. This may be in the form of cash or the opportunity to purchase goods at lower prices. In Bangladesh, the social safety net is so fragile that very few people benefit from it. Due to nepotism and corruption by the previous government, those who were supposed to benefit from this safety net did not receive it. In this situation, a section of the middle and lower-middle class depended—and still depends—on the returns from investments in savings certificates. With the interest rate cut from 1 July, they will face hardship. Negative reactions to this have already appeared on social media.

Given the current rate of inflation and the skyrocketing prices of essential goods, reducing the interest rate on savings certificates at this time will further strain the lives of people with limited income. Those who used to save a small amount each month for future security will now lose both the motivation and the capacity to save. On the other hand, the interest rate on deposits in commercial banks is quite low. If ordinary people keep their money there, they effectively face losses due to inflation. As a result, savings certificates were their only somewhat profitable and safe option. Reducing this rate means pushing people with limited income towards risky and unreliable investments.

The government argues that this step is necessary to meet revenue shortfalls and to maintain budgetary balance. But the question is—why is it always the weakest and most ordinary people in society who are made scapegoats in achieving that balance? While loan defaulters are being given leeway in banks, and no effective steps are being taken against tax evasion, is it fair to punish the general public? This decision warrants reconsideration. The interest rate on savings certificates should be kept at a level that will, on one hand, manage the government’s liabilities, and on the other hand, maintain a layer of security for people with limited income. No state can move toward sustainable prosperity by increasing financial pressure on the most marginalised members of society. The question is, why burden people with limited income by lowering the interest rate on savings certificates? They already have fewer privileges. We appeal for the decision to be reconsidered.