KARACHI: The investment in premium prize bonds of Rs40,000 denomination has sharply increased by 156 percent to Rs14.84 billion by August 2019 as compared with Rs5.78 billion in the same month of the last year.
The significant increase in registered prize bonds of Rs40,000 denomination has been attributed to the announcement of the government to seize the issuance of unregistered instrument to stop expansion of black economy.
In February this year the central bank stopped the issuance of Rs40,000 denomination prize bonds from its offices. The SBP also advised the Central Directorate of National Savings (CDNS) to stop printing the unregistered Rs40,000 prize bonds.
A member of Tax Reform Committee (TRC), which was constituted by the former government in 2014 said that it was recommendation of the TRC to stop the circulation of high denomination prize bonds.
The member said that the committee had presented its report in May 2015 and advised the then finance minister the high denomination prize bonds were major source for expansion of black economy.
The TRC had recommended to document high denomination prize bonds of Rs25,000 and Rs40,000 and should be issued against CNICs of individuals.
The government on June 24, 2019 announced to discontinue the circulation of Rs40,000 denomination bearer prize bonds.
In compliance to the government announcement the SBP also issued instructions to banks. The central bank issued procedure for the banks to facilitate general public in exchanging the unregistered prize bonds with three different modes.
The SBP said that the bearer prize bonds of Rs40,000 cannot be exchanged against cash. However, it can be redeemed against registered prize bonds or can be converted into national saving schemes or face value (direct transfer to the bank account of bond bolder).
The SBP informed the banks that such prize bonds would not be sold after June 24, 2019 and will not be encashed/redeemed after March 31, 2020. No further draws of Rs40,000 denomination national prize bonds shall be held.
The government is intending to expand the documented prize bonds in other denomination as well on the recommendations of the TRC, the member said.
The TRC in its report pointed out: “Issuance of prize bond of Rs 25,000 or Rs 40,000 should be discontinued as these high denomination bearer instruments fuel corruption and tax evasion.”