After the government’s decision to reduce interest rates on post office savings in Bangladesh in the last few weeks, new thinking has started on which will bring more profit as a means of saving or which sector will not reduce profits.
However, on February 19, the government said it would reconsider the decision.
But what are the means by which a citizen can save in Bangladesh now? And should an adult who has an income save exactly the same percentage of income?
How much income should be saved
Generally, what percentage of a person’s income should be saved depends on his income and unavoidable expenses.
The general calculation of the economy is that if one can make a habit of saving one-fourth of one’s income, i.e. 20-25 per cent, then one does not have to fall into poverty in retirement.
Saima Haque Bidisha, Professor, Department of Economics, Dhaka University, said, “The prevailing pattern in society is that middle-income people save more. And for the complete opposite reason, lower and higher-income people save less. The daily life of low-income people is a challenge. “
He says that the rate of saving of an individual depends on the fluctuation of income and expenditure of the people, as a result people make less decisions by rushing on the facilities available in a particular sector.
Which means can be saved in Bangladesh
Banks, government bonds, capital markets, mutual funds, gold, land and apartments are the most common means by which a citizen can save in Bangladesh.
Fahmida Khatun, executive director of the Center for Policy Dialogue CPD, a research institute, said people still have the most confidence in the sectors through which the government is working.
Therefore, besides banks, people buy savings certificates and land as a future dependence.
The banking system is the most common for savings in Bangladesh.
The main reason behind this is that the bank has a network up to the remote areas of the country, and the number of bank accounts in Bangladesh has almost tripled in the last one decade.
There are several savings schemes in the bank. You can deposit money through long term deposit pension scheme or DPS, fixed deposit or FDR.
Apart from this, you can get a certain profit even if you keep money as a saver.
Some banks have a double return scheme for doubling deposits every five or six years.
Syed Mahbubur Rahman, former chairman of the Association of Bankers Bangladesh and managing director of Mutual Trust Bank, said no bank has been declared bankrupt in Bangladesh in the last 47 years, which is a big reason for people’s confidence in the bank.
Although some banks in Bangladesh have been in financial trouble at different times, whenever the condition of some banks has deteriorated, the government has tried to ‘bailout’ them with financial assistance.
He said that at present, state-owned and commercial banks in Bangladesh pay an average of eight to nine per cent interest on DPS.
On FDR and double return schemes, an average of six to six and a half per cent interest is paid by bank.
Even if a couple of banks give a little more, this is the average calculation.
In the last few years, state-owned and commercial banks in Bangladesh have reduced the interest rates payable to customers.
However, analysts do not consider it a risk. But the question is how much profit there is on savings after interest rates fall, inflation and other taxes are paid.
Suppose a person has made an FDR of 100 rupees, he is supposed to get 108 rupees after maturity.
But the money he will receive after five years, including the profit, may not be in the expected value due to inflation.
Savings certificates and other government bonds
Another popular means of savings in Bangladesh is savings certificates, prize bonds and other government bonds. Scheduled Banks including National Savings Bureau, Bangladesh Bank and other bonds including Savings Certificates can be purchased from Post Office and redeemed at maturity.
There are four types of savings certificates available in the market — Family Savings Certificate, Five Year Bangladesh Savings Certificate, Pensioner Savings Certificate and Three Monthly Profit Based Savings Certificate.
The return on term savings certificates now ranges from 11 per cent to 11.6 per cent.
Analysts believe that the general public is leaning towards savings certificates as interest rates on bank savings have come down.
The capital market
In many countries of the world, people save in the capital market.
Many people also invest in the capital market in Bangladesh, but the number of people who go to the capital market to save money is less.
Fahmida Khatun, Executive Director, CPD, said, “The general public has little confidence in the type and management of money transactions in the capital market in Bangladesh, which is why many people there may not want to save money.”
In this context, he cited the example of two major stock market scandals in the last two decades, saying, “Many have disappeared at that time, which has set a negative precedent.”
In many countries of the world people invest in gold. Many people in Bangladesh also buy gold coins or palms.
However, it is not very common as a means of saving.
The general idea is that the price of gold is determined by the international market, and the price of gold has been rising over the last few years.
But the risk in this case is that if the price falls in the international market, the price of stored gold will go down.
Mutual funds are a very common savings medium in Bangladesh. It is managed through a fund manager listed on the capital market.
In this way the customer will buy a unit of a company like buying shares of an organization, and will get profit at the end of the year.
This means that the fund manager trades in shares of another company and shares the profits with the unit holders.
By investing in a mutual fund, a customer can get a tax rebate of up to 10-15 per cent per annum.
Bangladesh At present there are about 40 mutual funds listed in the capital market.
Land and flats
Land has always been considered a popular means of saving and investing.
There is a land crisis in Bangladesh due to population growth, which is why land prices are rising.
But economists say land prices in the country have not risen in that sense over the past few years.
Again, many people buy apartments or flats not only as a place to live but also as a savings.
If you don’t have the confidence to put money somewhere, you can keep it at home.
But the risk is that the value of your money will continue to decrease with the year of fee inflation.
Some money notes or coins may be canceled over time.