Govt makes 3rd revision to overseas certificate terms

Increases up to 1.25 per cent penalty for premature encashment of Pakistan Banao Certificates

ISLAMABAD: The federal government has increased up to 1.25 per cent the penalty for the premature encashment of the Pakistan Banao Certificates – dollar investment certificates recently launched for overseas Pakistanis.

During the past three months, the government has reportedly amended the terms and conditions of the certificate three times. The Ministry of Finance has released four gazette notifications pertaining to the certificates during the first month of the launch of the investment scheme.

The first notification dated January 2 issued rules pertaining to the certificates, according to which three-year certificates offered an annual return of five per cent while five-year certificate offered a rate of 5.5 per cent. According to the rules, the dollar certificates could be converted into Pakistan rupees any time.

However, encashment made before six months would not get any profit to the certificate holders, while those retaining the certificates after the maturity period were also not entitled to any profit.

In addition, the minimum period for encashment in dollars was one year. Before this period, the government would deduct one per cent of the dollar value invested in certificates while the remaining principal would be deposited in any foreign currency account in Pakistan or abroad.



However, encashment in rupees promised profit for the last six months plus an additional one per cent as profit on investment. The Finance Ministry released its second notification on January 29 in which it amended the rules.

While the rate of profit on the certificates remained unchanged, the ministry set payment of fixed six-monthly return to LIBOR plus 400 basis points. It also withdrew the penalty for premature encashment before one year and attributed it to its profit rate offered during the release of the certificates.

It was further stated that the ministry after accounting for penalty for premature encashment based on its rate will deposit the dollar amount in the bank accounts of the bond holders.

A day before Prime Minister Imran Khan formally launched the scheme, the ministry through its notification dated January 30 introduced further amendments according to which annual profit rates for 3-year and 5-year Pakistan Banao Certificates were increased to 6.25 and 6.75 per cent respectively.

Another notification released on the same day introduced further amendments after which premature encashment of investment certificates held a penalty up to 1.25 per cent while the period of premature encashment was increased to one year from the previous six months.