Karachi, September 13, 2024 – The Central Directorate of National Savings (CDNS) announced a significant reduction in profit rates for various savings certificates and accounts on Friday, following the State Bank of Pakistan’s (SBP) decision to cut its key policy rate.
This move comes in the wake of a 200 basis point reduction by the SBP, bringing the policy rate down to 17.50%.
The profit rate cuts reflect the broader monetary policy adjustments aimed at stimulating economic growth by reducing the cost of borrowing. According to analysts at Topline Research, the most notable change is in the Sarwa Islamic Term Account, where the profit rate has been slashed by 122 basis points, dropping from 17.58% to 16.36%. The Sarwa Islamic Saving Account also saw a substantial reduction, with profit rates cut by 100 basis points, lowering them from 19% to 18%.
In addition to cuts in Islamic savings instruments, the National Savings has adjusted the profit rates for several conventional savings schemes. The regular income certificate saw a relatively modest reduction, with the rate dropping by 12 basis points, from 14.64% to 14.52%. The Special Saving Certification experienced a more pronounced decrease, with profit rates reduced by 30 basis points, moving from 15.50% to 15.20%.
Similarly, the Special Saving Account saw a decrease of 30 basis points, bringing the rate down from 15.50% to 15.20%. Meanwhile, the profit rate for the short-term saving certificate has been cut by 68 basis points, dropping from 17.90% to 17.22%.
The decision of National Savings to lower profit rates follows the SBP’s aggressive monetary policy move aimed at countering inflation and stimulating the economy. The central bank’s rate cut is expected to have a cascading effect across the financial sector, influencing everything from loan rates to savings yields.
While the profit rate reductions may disappoint some savers who rely on these instruments for stable returns, analysts note that the changes are aligned with the SBP’s broader objective of fostering economic growth. Lower interest rates, they argue, will ease borrowing costs for businesses and consumers, potentially boosting economic activity in the long run.
For savers, however, the reduced profit rates present a challenge in maintaining inflation-adjusted returns. With inflation having cooled in recent months, the real return on savings remains under pressure, particularly for those reliant on fixed-income investments.
In conclusion, while the cuts in profit rates reflect the broader economic policy shifts, savers will need to adjust their strategies in response to the evolving financial landscape. The National Savings is expected to continue monitoring economic conditions closely as it aligns with the SBP’s monetary policies.
