National Savings reduces interest rates on savings accounts

ISLAMABAD: The Central Directorate of National Savings announced a substantial decrease in interest rates for various savings account.

The move raised concerns among the public as savers and market analysts alike were worried and taken aback.

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The interest rate for the Sarwa Islamic Account has been cut by 1.22 per centage points. It is now set at 16.36 per cent.

Similarly, the Sarwa Islamaic Saving Account will see a reduction of 1 per cent, bringing down its rate to 18 per cent.

The interest rate for the short-term savings certificates also dropped by a meagre 0.68 per cent to rest at 17.2 per cent now.

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Rates for special savings certificates and special savings accounts were lowered by a nominal 0.3 per cent, bringing them to 15.5 per cent.

The return on regular income certificates was also reduced by 12 basic points, resulting in a new rate of 14.52 per cent.

The adjustments are concerning as lower interest rates means reduced returns for savers, mostly elderly with no other source of income. This can significantly impact people relying on the savings for their financial security.

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Many people, particularly retirees, depend on the interest earned from their savings to supplement their income, if not entirely dependent on it.

With rate declining, their purchasing power diminishes, making it harder to keep up with rising living costs. And with Pakistan currently going through one of worst inflation in the world, this has made the life of an average person a living hell.

National Savings’ decision to lower interest depends on several factors. For one, the current economic climate, characterised by inflationary pressures and a fluctuating financial landscape, necessitated the step.

In an effort to stimulate economic growth, financial institutions often lower interest rates to encourage borrowing and spending. However, this can backfire, especially for savers, who may find their savings yielding less returns over time.

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The National Savings may also be responding to broader market trends, where interest rates have been generally declining due to central bank policies aimed at managing economic stability.

As the financial environment shifts, the State Bank and other state-owned financial enterprises will similarly adapt their offerings as well, often at the expense of savers.