National Savings Bonds to be launched on 11th

ISLAMABAD: The National Savings Organisation will start issuing National Savings Bonds from Jan 12 which would be tradable on stock exchanges in Karachi, Lahore and Islamabad.
 
Federal Finance Minister Shaukat Tarin will officially launch the savings bonds at a ceremony in Islamabad on Monday (Jan 11).


It will be the first time in the history of the country that the National Savings would offer 100 per cent scrip less government guaranteed bonds for investment in collaboration with Central Depository Company.

The Director-General of National Savings, Mr Zafar Shaikh, told Dawn that the bonds would be available for three, five and 10 years maturities, and would be opened on Jan 12 for two weeks. Tax on the bonds would be as per law. However, it would be exempted from zakat.

The investment in the bonds can be made with a minimum amount of Rs20,000 and in multiple of Rs10,000 without any maximum limit. Profit on these bonds will be semi-annually. The bonds will be issued to individuals, mutual funds, provident, pension, gratuity funds or trust funds excluding body corporate and banks irrespective of their residential status.

The investment by people residing outside Pakistan would be in foreign exchange remitted through the official banking channels. The bonds are redeemable upon maturity.

However, the investor may buy or sell it through stock exchanges at the prevailing prices before maturity.
Mr Zafar Shaikh said that the bonds were being issued based on in-house resources and no borrowing from any financial institution is involved.

He said that the National Savings recorded an investment of over Rs100 billion during the first six months of the current fiscal year as against Rs47 billion during the same period of fiscal year 2008-09.

Although the organisation has set an investment target of Rs240 billion and by June this year, the target may exceed, Mr Shaikh said.

The bonds will be advantageous for small and medium investors who will get better returns as compared to commercial banks in addition to the potential of capital gain, he said.

The bonds will have almost zero dependence on the State Bank of Pakistan and also in line with the recommendations of International Monetary Fund (IMF) for promoting non-banking financing.

The National Saving Bonds will be listed on the KSE, LSE and ISE which will act as provider of liquidity for Saving Bonds during the life of the instrument by facilitating secondary market trades. In addition, the market makers would also make market for the instrument.

For the issuance of saving bonds, the National Savings Organisation has already made arrangements with the stock exchanges at Karachi, Lahore and Islamabad. The bonds, authorisd by the ministry of finance, are backed by the sovereign guarantee of the government of Pakistan.

The rate of return on saving bonds of three years will be 12.50 per cent per annum, five years: 12.55 per cent and ten years: 12.60 per cent.

Fluctuations in interest rates and underlying inflation may adversely affect the yield to the investors.

The intending investors having no account with the Central Depository Company (CDC) may get an account or sub-account opened with CDC having offices in Karachi, Lahore, Islamabad, Faisalabad and Hyderabad.