Money ‘being shifted to saving schemes’ from capital market

The freefall in the capital market has prompted many individual investors to switch over to various saving schemes, increasing the revenue flow to the national exchequer.According to data provided by the National Board of Revenue (NBR), collection of tax from the interests of bank deposits marked a rise by nearly 22 percent in the current fiscal.
The NBR collected Tk 1631 crore as advance income tax (AIT) from the deposit-holders of banks on account of their interest receipt during the July-February period. The amount was Tk 1192 crore during the corresponding period in the last fiscal.
“Yes, the money is being shifted from the capital market to savings certificates or such other instruments as the share market has remained volatile for a long time,” economist Abu Ahmed told UNB over phone.
Apart from the market volatility, Abu Ahmed said, the banks have increased the interest rate of deposit that encouraged the small capital market investors to shift their money from the market.
In this connection, he blamed the Bangladesh Bank for its monetary policy that allowed the banks to increase their interest rates on deposit.
Abu Ahmed said the small investors of the capital market shifted their money from the capital market particularly from July 2010 to 2012.
He mentioned the central bank in July 2010 tightened the monetary policy in the name of containing inflation rate that also led the banks to increase their interest rates on deposit.
“The trend of shifting money is unlikely to fall in the coming days as we’re seeing no sigh of hope for the stock market in near future,” he said.
In this connection, he said the stock market is fully linked with the country’s political scenario. “The current political scenario is not favourable for stock market,” he said.
The AIT on deposit interest earnings have been re-fixed at 15 percent for those who do not have tax identification number (TIN). It was 10 percent until the last fiscal.
Individual assesses, enjoying income exceeding the ceiling allowed for final payment of taxes within the 15 percent tax slab, have to pay 5.0 percent or 10.0 percent more, depending upon their level of income, while filing their annual tax returns.
The rate of tax collection growth from interest receipts from bank deposits were 19.14 percent, 16.59 percent and 14.60 percent in fiscals 2008-09, 209-10 and 2010-11 respectively. Last year, its growth stood at 33.94 percent over that of previous one.
According to a BB estimate, the number of bank depositors increased by 20.32 percent with their aggregate deposits of Tk 539568 crore in calendar year 2012 compared to TK 448442 crore in 2011.
Meanwhile, the central bank has warned 17 commercial banks, two foreign and the rest local private banks, against offering higher interest rates on deposits.
The Association of Bankers Bangladesh Ltd, a platform of banks’ chief executives, put the limit at 12.5 percent through an informal understanding among banks. UNB

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