Economist Ashraf Ghorab explained the reasons behind why the National Bank of Egypt, and Banque Misr are offering two certificates of deposits online with a return of 23.5 percent per month and 27 percent per year for a period of one year, starting Friday.
This was an expected move, he said, especially following the the expiration of the terms of CDs offered by the two banks with a 25 percent return, which matured at the beginning of this January.
Regarding the reasons for offering new savings certificates, Ghorab added that the expiration of the 25 percent certificate offered by the two banks in the beginning of last year and depositors receiving their entitlement may prompt them to invest in gold, real estate, or other types of safe investment instead of depositing money in banks.
This comes in order to preserve the value of their money as a result of the rise in inflation rate, he explained.
Therefore, the two banks hastened to issue the 23.5 percent and 27 percent CDs to absorb this money and withdraw liquidity, Ghorab said, instead of pumping it into the markets and causing an increase in demand and in prices – thus impacting inflation rates that have declined in the past few months.
Ghorab noted that the 25 percent CD offered by NBE and Banque Misr last January collected about LE460 billion.
With the returns from what depositors added to this amount, the released liquidity becomes approximately LE 575 billion, he said.
He added that this liquidity is not small once put onto the markets, leading the two banks to issue new CDs with a good return to absorb this liquidity, preserve their customers’ investments and obtain rewarding returns.
Ghorab pointed out that although there are other savings vouchers offered by banks before, they have a return of less than 25 percent and investors may not resort to them, explaining that this is why the banks have offered the new CDs with a higher return.