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Investment in premium prize bonds surges 211pc till May

Business

July 8, 2020

KARACHI: Investment in premium prize bonds of Rs40,000 denomination has surged more than two times in a year owing to government initiatives for documentation of economy, official data showed on Tuesday.

Investment in registered prize bonds of Rs40,000 surged to Rs19.19 billion till May-end compared with Rs6.17 billion in the same month of the last year, registering growth of 211 percent, according to data released by Central Directorate of National Savings.

Market sources said the substantial increase was due to government initiatives to introduce reforms in saving schemes.

Besides, the surge in investment in registered prize bonds was also due to discontinuation of bearer prize bonds of Rs40,000 denominations.

The ministry of finance recently issued rules ‘National Saving Schemes (AML and CFT) Rules, 2019’ for curbing money involvement used for terror financing and money laundering.

Under the rules, the authority will collect all information of people investing in saving schemes. The information includes name, address, CNIC, and passport number. Further, the investors either existing or new investors will be required to provide information about source of money related to amount of investment.

The government launched premium prize bonds in April 2017 to document the economy. The premium prize bonds are being issued only against CNIC with valid bank accounts. Further to make the instrument attractive the government also announced bi-annual profit, which transferred directly to the bond holders.

The pace of investment in the premium prize bonds witnessed significant increase after the announcement of the government to discontinue the bearer bonds of Rs40,000 on June 24, 2019.

The bearer bonds of Rs40,000 was to be completely discontinued for legal tender by March. However, due to COVID-19 lockdown the government extended the deadline to exchange the bearer bonds up to December 31.

A massive withdrawal of investment has been seen in the bearer instrument as the total investment, which was at Rs258 billion in May 2019, was reduced to Rs1.5 billion by May 2020.

The sources said since withdrawal of investment from bearer bonds was allowed only through prescribed mode, the money became part of documented economy.

The State Bank of Pakistan said the bearer instrument can be exchanged in savings schemes such as special or defence saving certificates. The third mode of exchange of the bearer bonds is direct transfer to bank accounts.

The sources said the investment was also witnessed increase due to measures of the government to document all instruments of National Saving Schemes as per conditions of the Finance Action Task Force.