ISLAMABAD, Oct 12: All of us are affected by interest rates. Who needs stocks or engage in other business activities when one can get 15 per cent or more on his money with no risk to the capital.

The scenes at various National Saving Centre branches are enough to make anyone anxious. Working, retired individuals as well as widows, men and women alike, are exchanging old saving certificates for new ones that offer higher returns on short- as well as long-term returns without wasting a minute.

All of a sudden, nine to 15 per cent return today compared to six to seven per cent monthly return a couple of years ago look pretty attractive.

For pensioners like Mr Khalil, Rs1,250 on every Rs100,000 every month is a comfortable return in these days of high inflation. “It’s still probably not enough. But at least goes along with the market,” he said.

A senior citizen, Mrs Ahmed has invested in one of National Savings’ long- term schemes. She paid Rs9,000 fine for premature withdrawal of her certificates to reinvest in the higher returns Behbood Savings scheme.

“The loss is a petty one. Living is too expensive these days. Now I’ll get Rs1,130 every month instead of the previous rate of Rs920. The loss will be made up for in a few months,” she said.

The government raised interest rates twice in less than four months - in June and then in October. The new rates are so attractive that some National Savings Centre outlets were drained of new certificates. People have had to wait two to three days before new ones came in. In some cases, older certificates were issued with new dates.

“There is a change in government policy given the uncertainties in the capital market. Instead of revising rates biannually, we will do it quarterly,” said a National Savings Centre official.

“We used to be behind the market by a year. Not anymore. There is a revamping of our investment strategies. We want to be as efficient as the market for survival,” the official said, adding, “In fact, interest rates should be revised every month if not fortnightly.”

According to a official source, the government needed an additional Rs150 billion by June 2009. Last year, the government raised Rs87 billion through its national savings schemes.

National Savings total portfolio stands at Rs1.16 trillion. It mostly targets small investors and have over six million registered investors.

Some people, such as Mr Izzat, are willing to accept a return that’s possibly lower than buying and selling new and used cars in exchange for a risk free, guaranteed return on their principal.

“Business has been slow. Buying and selling cars was a side job and profitable. But business isn’t good anymore and bank returns are higher and safe,” saidMr Izzat, who withdrew spare money from a private bank and invested it in one of the National Savings schemes.

M. Nasir, also a businessman, suggested that if one was planning to buy a house next year and already have money set aside for a down payment, they may want to put it in a one-year savings account.

Crunch in world’s capital banking systems and the recent rumours of defaults have eroded people’s confidence in private banking system.

“The rise in our rates should hardly affect private banks. National Savings offer less than some private banks’ but we also guarantee government backed security. Recent stock market volatility and rising interest rates are no doubt giving boring bank certificates of deposit a new luster. The crunch in international banking systems will not harm Pakistani banks but rumours that were spreading earlier can be dangerous,” he said.

Nonetheless, some in the private banking system do not believe in raising rates or returns. “The old mattress stuffers are back in vogue. High interest rates discourage economic activities. Money belongs out there in the markets not stored away,” said one banker.