From 1972 onward, national savings centres are engaged in the operations of various schemes through the network. And presently there are about 4.3 million NSS investors.

The ongoing saving schemes in operation are Defence Savings Certificates (DSC), Special Savings Certificates/Accounts, National Deposit Certificates (NDC), Savings Account, Regular Income Certificates, Mahana Amdani Accounts, and Prize Bonds. The two new saving scheme entitled "Pensioners' Benefit Account" and Behbood Savings Certificates were launched recently.

The salient features of the most popular schemes are discussed below.

* Defence Savings Certificate (DSCs) are issued for 10 years, encashable any time after one month, at compound rate of return of 7.96 per cent, effective January 2004. Certificates purchased prior to the said date shall earn profit at the rate prevalent on the date of purchase. There is no maximum limit of investment. The outstanding DSC stock was Rs 312.2 billion in December 2003.

* Regular Income Certificates are of five years maturity. Profit is payable on monthly basis reckoned from the date of issue of certificates. The certificates can be purchased by individuals singly or jointly. There is no upper limit of investment. These certificates are available in the denominations of Rs50,000 to Rs10,000,000. The latest profit rate on these certificates is 7.08 percent per annum.

The certificates purchased prior to January 2004 shall earn profit at the rate prevalent on the date of purchase. The profit earned shall be subject to deduction of withholding tax at source but are exempt from compulsory collection of Zakat at source. The outstanding stock of the scheme was Rs152.4 billion in December 2003.

Special Savings Certificates (Regd)/Account is a three years scheme, but investment can be withdrawn any time after one month. The latest average compound profit rate is 7.27 per cent.

The above rate is applicable on the certificate purchased/deposits made from January 1, 2004 to June 30, 2004. The certificates purchased/deposits made prior to the said date shall earn profit at the prevalent rate on the date of purchase/deposit. There is no maximum limit of investment by the investors. Its outstanding stock was Rs287.5 billion in December 2003.

Pensioners' Benefit Account is a newly launched savings scheme with 10 years maturity specifically meant for the retired government employees. Premature withdrawal from the account entails some service charges. Profit is payable on monthly basis reckoned from the date of deposit.

The account can only be opened by a pensioner with a minimum deposit of Rs 10,000/-. These accounts can be opened only at the National Savings Centres. The scheme's outstanding stock was Rs18.8 billion in December 2003.

National Prize Bonds are available in the denominations of Rs200, Rs750, Rs1,500, Rs7,500, Rs15,000 and Rs40,000. No fixed profit is paid. However, quarterly draws are conducted for each denomination separately. The prize money is paid at the rate of 6 per cent per annum of the value of a series. Tax at 10 per cent of the prize money is deducted at source. The outstanding stock of the schemes was Rs143.5 billion in December 2003.

The total outstanding stock of the national savings schemes was Rs987.4 billion by the end of December 2003 out of which 77 per cent share was owned by three big schemes namely, Defence Saving Certificates, Special Saving Certificates, and Regular Income Certificates.

The growing burden of interest payments on domestic debt is already eating a big chunk of the governmental resources and the budgetary allocation. During the 1990s total interest payment on domestic debt amounted to Rs1088 billion, (Rs109 billion per annum) while during 2000-03 interest payment amounted to Rs 593 billion (Rs198 billion per annum). Interest payments on domestic debt now consume about 24 per cent of total revenue of the government. The composition of domestic debt has also undergone considerable changes in the last five years.

There was a rapid increase in the stock and interest payment on unfunded debt, which mainly comprises the outstanding stock of the NSS. For example in 1997-98 share of unfunded debt to total domestic debt was 36.6 per cent, which increased to 49.1 percent in 2002-03.

The attractiveness of the returns on the NSS is mainly responsible for tremendous increase in unfunded debt resulting in huge interest payment liability by the government.

Although in absolute term, interest payments on other domestic debts are gradually declining the interest payment on unfunded debt is increasing. For example total interest payment on domestic debt was Rs218.7 billion in 1999-2000 which came down to Rs198 billion in 2002-03. But in the case of unfunded debt interest payment had increased from Rs105.5 billion to Rs115.8 billion in the same period.

As a result of introduction of market oriented reforms in the financial sector in general and in the interest rate structure in particular, both lending and deposit rates of the scheduled banks have come down considerably. But as compared to their lending rates, the deposit rates of the scheduled banks have declined more than proportionately.

For example the weighted average (WA) lending rate of the scheduled banks had declined from 14.02 in 1999-2000 to 5.68 per cent in December 2003. During the same period their weighted average deposit rate had come down from 5.89 per cent to 1.42 per cent, which in real term was 1.7 per cent negative. On the other hand, the WA deposit rate of the NSS had declined from 15.37 per cent in 1999-2000 to 7.32 per cent in December 2003, which in real term was 4.2 per cent positive.

Government has been pursuing a policy of retiring costly debts-both domestic and external. The same policy should be applied to NSS. But Pensioner's Benefit Account and Behbood Saving Certificate should be allowed to continue for the benefit of the poor, the widows and the senior citizens.

In the current year, government has drastically reduced net NSS borrowing to Rs8.5 billion during July-December 2003, as compared to Rs48.9 billion in the same period last year. This is a good beginning.