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CDNS to be converted to a corporation

ISLAMABAD — Pakistan government has approved the conversion of Central Directorate of National Savings (CDNS) into a "corporation" which would now allow it to also go into the mutual fund business.

According to official sources, the new Corporation — Pakistan Savings — would work under a proposed 8-member autonomous board.

The head of the new corporation will be called the chief executive instead of the director-general. The chief executive of the new corporation would also be one of the members of the policy board.

The secretary finance will also be the member and the chairman of the board. Others members will include the economic adviser to the minister of finance, the additional secretary budget, ministry of finance and four other members to be taken from the private sector. However, the cabinet division, sources said, has authorised the government to change the composition of the members of the policy board as and when required.

Pakistan Savings will have its own salary structure based on free market mechanism and the authority to expand the organisation with a view to substantially increase and diversify the saving products of the new organisation.

Sources said that CDNS, whose portfolio has increased from Rs80 billion to over Rs 1 trillion along with 4 million plus clients, will enjoy the considerable financial autonomy after becoming Pakistan Savings.

The government had restored last month the agency functions of all the authorised banks to sell savings certificates of the Pakistan Savings. The CDNS, which is currently fulfilling the requirement of deposit banking functions, is expected to offer good salary packages to the employees after it becomes Pakistan Savings. The government, sources said, has also in principle, agreed that the new corporation could go into the Mutual Fund business to be managed by professional assets management companies having a private sector management.

This mutual fund will be a subsidiary of Pakistan Savings for which the government will initially provide the equity.

The proposed Pakistan Savings will diversify its business and play an important role in resource mobilization and increasing the availability of domestic resources for investment.

The new organisation will also allow to introduce new products like offering funding for education, housing and marriages.

The ongoing pensioners and welfare schemes of the organisation are also likely to be further improved once the CDNS is converted into an Pakistan Savings.

The sources said that about 25 per cent of the total portfolio of the CDNS belonging to institutional investment including banks, has been rapid due to which there was some drop in the net portfolio.

The government is considering allowing the proposed Pakistan Savings to also work like other Financial Development Institutions (DFIs).

"A number of multi-dimensional targets and goals are currently being finalised which will be undertaken in next six months," a source said.

Presently, the CDNS is marketing only government securities through a network of some 350 branches. With significant reduction in return on fixed securities, brought about by the market conditions, small savers were feeling frustrated as they have no access to those securities that offer better return.

Under the proposed programme, there will be an upgradation of all the national saving centres through a detailed automation programme.

Number of transactions have increased manifold that warranted automation as it is becoming difficult to achieve desired results through manual handling of things.