On Monday State Bank of Pakistan (SBP) released its data that Investors pulled out Rs317.2 billion on a net basis from the National Savings Schemes (NSS) in the fiscal year 2020-21.
NSS outflows exceed inflows for the first time since 2004-05.
During the month of June, the net outflow of savings from the NSS totalled Rs123.8bn while in the comparable month of the preceding fiscal year there was a net inflow of Rs4.5bn.
Analysts are speculating that this change is due to various factors such as the prohibition of financial institutions to invest in NSS from July 1, 2020, the new registration requirements prize bonds and the newly implemented Anti-money Laundering (AML) and know-your-customer (KYC) conditions.
Pakistan-Kuwait Investment Company Head of Research Samiullah Tariq commented, “NSS had minimal AML and KYC requirements compared with banks. The government imposed stricter KYC rules amid growing pressure from the Financial Action Task Force (FATF), which left the biggest negative impact on fund mobilisation”
He added that now NSS is not a suitable option for many people as people are reluctant to mention their source of income.
He also pointed out, “People used prize bonds to settle transactions. They were bearer bonds, meaning there was no accounting as to who owned these instruments. That’s not the case anymore and prize bonds of high denominations must be registered now”
Rs290.4bn were withdrawn from prize bonds and Rs9bn from Defence Savings Certificates in 2020-21. While only Rs26.7bn came in through Regular Income Certificates.
According to the new regulations, non-filers will now pay 30 per cent tax instead of 20pc on their NSS profits while tax filers will have to pay 5pc instead of 10pc.
Analysts believe that these government decisions will result in low inflows in the current fiscal year as well.
