London: One of the Britain’s most generous savings products has been pulled abruptly from the market by the state-run National Savings & Investments (NS&I) after only 24 days amid complaints from rival banks and building societies.

NS&I has dropped the one-year bond offering 3.95 percent interest and a two-year product yielding 4.25 percent after the banks and building societies complained that they amounted to unfair competition.

NS&I conceded that demand for both products had been much stronger than expected. They began on October 26.

Graham Beale, the chief executive of Nationwide Building Society, confirmed yesterday that he had lobbied for the product to be pulled as he revealed that his organisation had suffered a £6bn drain from defecting depositors in the past six months alone.

Beale said that the NS&I rate was much higher than that offered by private-sector deposit takers. “No one was close,” he said. “I’m not against competition but I couldn’t compete with that. It wasn’t fair.”

Beale argued that NS&I had a significant advantage over rivals in the private sector because of the explicit government guarantee on all its products, which include savings bonds and Premium Bonds.

By contrast, only the first £50,000 of bank and building society deposits is guaranteed.

“We have made representations, and I understand others have done the same,” Beale said, accusing NS&I of exploiting its advantage. “It is tantamount to using taxpayers’ money to subsidise an uneconomic rate.”

He said that he was also concerned about savings rates offered by other state-owned or state-controlled banks, naming Northern Rock and Cheltenham & Gloucester, part of Lloyds Banking Group, as offering overgenerous rates. “The market is being distorted,” he said.

John Prout, the sales director of NS&I, said that he was not aware of any lobbying by rival deposit-takers and that the products had been withdrawn “for internal reasons”. “We were busy, and busier than we expected to be,” he said of the flood of applications for the bonds. He conceded that the rate on the one-year bond was the market leader but said that it was not that far out of line.

The Post Office, another state-owned organisation, had been offering 3.7 percent on a one-year savings product.

Private-sector banks and building societies have become increasingly unhappy with NS&I, which attracted an extra £12bn in deposits last year as nervous savers sought an ultra-safe home for their money at the height of the banking crisis.

NS&I has a target of raising no new net money this fiscal year but it will still garner between £12bn and £13bn in gross new deposits and investments to offset the similar amount of money leaving its coffers as its products mature or are redeemed. It says that its market share of 7 percent to 8 percent has changed little in recent years.

With the public finances deteriorating, the Government will need to find new sources of finance to meet a borrowing requirement this fiscal year of £175bn, according to Treasury estimates, and £200bn or more, according to City economists.

That could require NS&I to find more than the £96bn it has raised from the public, especially if the appetite for gilts fades. “We’ve had no requests from the Treasury to change our approach,” Prout said.

Beale said that he was not prepared to chase deposits. Instead, Nationwide increased its dependence on wholesale funding in the six months to September.

The society, Britain’s biggest, posted a 64 percent drop in underlying profits to £117m as it was hit by a blowout in bad debts on loans to commercial property developers.

Total impairments rose from £74m to £317m but the core residential mortgage book was relatively robust with arrears levels little changed at 0.66 percent of the entire portfolio.