Savings certificates interest rates reduction: To add insult to injury

A kind of panic and adverse reaction have been created among the country’s ordinary savers after the government decided to reduce the profit rates on savings certificates on June 30. Behind this outraged response lies a harsh reality— for a large number of retired people in the country, especially from the middle and lower-middle classes, savings certificates are not merely an investment tool; they are a monthly source of income, a lifeline. For years, they have relied on the interest from savings certificates to meet expenses like medical treatment, house rent, children's education, or buying essential goods.

In this reality, the sudden reduction in interest rates on savings certificates has directly affected their sense of financial security. This seems to have come at a time when people are already struggling to cope with ongoing high inflation. This decision has undoubtedly added insult to injury.

High inflation has persisted in the country for the last two years. Prices of food items, house rent, fuel costs—everything has increased in tandem. Yet, people’s real income has not increased during the same period. Especially in the private sector, the rate of salary increase has been minimal, and except for government employees, the vast majority of the working population remain outside the pension system. As a result, the crisis has intensified further.

The severity of the situation is evident from the data of the National Savings Directorate. In the first 10 months (July–April) of the 2024–25 fiscal year, net sales of savings certificates fell by about Tk 7,500 crore. That means people are buying fewer savings certificates, rather they are encashing previous investments more. This clearly indicates that both the investment capacity and saving ability of people have declined.

In developed countries, personal finance is an important issue. Pension, life insurance, health insurance, long-term investments—all have a planned structure. In Bangladesh, this remains extremely weak.

Though a universal pension scheme was introduced in 2023, it has not yet gained much popularity. People are either unaware of or reluctant to trust the pension schemes of insurance companies. As a result, most people rely solely on savings certificates in the absence of alternatives. When the government takes advantage of this dependency by reducing interest rates, it becomes a major setback for financially vulnerable groups.

Other countries in the subcontinent have taken effective steps to counter the effects of inflation. They have implemented different social protection programmes. Sri Lanka has introduced a cash assistance programme called ‘Aswasuma’, which is playing an effective role in poverty alleviation. In Pakistan, about 15 million families receive cash assistance under the ‘Ehsaas’ programme. In India, cash support is directly transferred to bank accounts through Aadhaar cards, along with fuel subsidies and ration benefits.

In Bangladesh too, the government has maintained some limited support programmes, among which the Trading Corporation of Bangladesh (TCB) is notable. TCB sells some subsidised products—like rice, lentils, oil, sugar, etc.—through truck sales and ‘Family Cards’ on a fixed monthly quota for low-income people. However, this support is both numerically inadequate and fraught with procedural and social difficulties. Firstly, though millions of people live on limited income, TCB’s assistance reaches only a few lakh families, which is negligible compared to the total poor population. Secondly, the distribution process is neither sufficiently transparent nor dignified—many feel humiliated standing in line in public to buy rice or lentils from trucks. Especially middle and lower-middle-class people, who do not wish to be identified as ‘aid recipients’ in society, keep themselves away from this benefit. As a result, those who need the assistance the most often do not receive its real benefits.

Besides these limitations, a deeper problem is that the growing disconnect between the overall picture of the economy and people’s quality of life is becoming more pronounced. Over the past decade, Bangladesh’s GDP growth rate has averaged around 6 percent, which is undoubtedly an encouraging sign. Statistics show that poverty has declined due to this growth. However, in real life, the benefits of this growth have not been distributed equally. Though indicators like infrastructure development, increased foreign currency reserves, or rising urban consumer demand may be used to measure growth, improvements in quality of life—especially food security, healthcare, education, and employment stability—have remained quite limited.

Currently, the situation is even more precarious. The COVID-19 pandemic, global economic uncertainty, and pressure from domestic monetary policy have slowed the pace of growth. On the one hand, employment is low, and on the other, inflationary pressure continues to rise. According to the World Bank’s latest forecast, the number of people living below the extreme poverty line could increase by nearly 3 million in the 2025 fiscal year. This is not merely an economic signal, but a humanitarian one—where people are failing to meet their basic needs. In this context, it is not possible to build a true social safety net with limited and dignity-eroding assistance structures like TCB. Rather, what is needed is a long-term, inclusive, and dignified social protection policy that will allow people of all classes to survive crises with honour.

In such a situation, the government’s responsibility should have been to protect distressed populations, to stand beside them in the face of real inflationary pressure. But instead of taking on that responsibility, the government has further cornered the general public by reducing the profits on savings certificates.

To ensure long-term financial security for people, the personal savings and pension sectors must be strengthened. Trust in insurance companies must be established, and pension schemes must be popularised through public-private initiatives. For this, it is necessary not only to revise the interest rates of savings certificates in a timely manner but also for the government to build an alternative safety net; to expand the scope of social protection and launch specialised programmes to address inflation.

Savings certificates are not merely a financial investment tool—they are a reliable security system deeply intertwined with many people's future life plans. Especially for retired citizens, widowed women, single-income families, and middle-aged people with limited means, they are a primary means of survival. Over the course of their working lives, they deposit their savings into savings certificates with the hope of living a stable and respectable life in the future. It is not just an investment in a bank—it becomes a symbol of financial comfort and self-respect at the end of a person’s life. In the current context, when inflation is out of control, the prices of essential commodities are constantly rising, and people’s incomes remain nearly unchanged—then even the small profit from savings certificates becomes the only reliable source of running a household. In such a situation, the sudden reduction in that profit rate is not just an economic policy decision—it directly strikes at people's sense of financial security, their plans for future stability, and their dreams. It is a decision that creates a stark contradiction between a sustainable economy and humane development.

It is true that in managing the economy, governments sometimes have to make tough decisions. Managing budget deficits, aligning monetary policy, or reducing debt dependence—all are part of economic governance. However, one crucial thing should be kept in mind when making such decisions: ultimately, the economy is related to people’s quality of life. The success of government economic policy does not lie solely in balancing budgets, but rather depends on the comfort, trust, and future optimism of ordinary people. When people are anxious about the safety of their savings, when they feel the state is not beside them, then improvements in large economic indicators carry no meaning in the lives of ordinary citizens. Therefore, decisions like reducing the interest rates on savings certificates may be technically correct on paper, but in reality, they create uncertainty and anxiety in the lives of many. If economic decisions lack human consideration, they eventually become anti-people. As a result, macroeconomic balance may be achieved, but balance cannot be restored in people’s lives. That is why it is said—such a decision becomes, in effect, a blow to the already afflicted.

Chiraranjan Sarkar: Columnist