Dear All,
Ministry of Finance, vide its Order No. 5-2/2010-NSII dated 8th July, 2010 constituted the Committee on Comprehensive Review of National Small Savings Fund chaired by Smt. Shyamala Gopinath, Deputy Governor, Reserve Bank of India.
The above said Committee on Comprehensive Review of National Small Savings Fund submitted its report titled “Report of the Committee on Comprehensive Review of National Small Savings Fund – June 2011” to the Hon’ble Finance Minister on June 7, 2011.
The Committee has observed (Page 19 - Historical Background – 2.1.1) that the schemes are operated through the countrywide network of about 1.5 lakh post offices, more than 8,000 branches of the public sector banks and select private sector banks and more than 5 lakh small savings agents.
The Committee has also observed (Page 73 - 7.3. Commission payable to Small Savings Agents) that State Governments have, in the past, noted the employment generated by small savings schemes.
The Committees has recommended (Summary of recommendations - Page 11) as follows :-
Commission Payable by the Centre to Small Savings Agents
At present, the Central Government pays commission at the rate of 4 per cent to small savings agents under Mahila Pradhan Kshetriya Bachat Yojana (MPKBY) on the P.O. recurring deposits scheme, which makes it essentially an agent driven scheme. The Committee is of the view that financial literacy programmes should promote postal savings instruments and the commission could be reduced by a minimum of 100 basis points each year to 1 per cent on PORD scheme within three years. Further, no commission may be payable on PPF and SCSS (as against commission of 1 and 0.5 per cent, respectively paid currently). A commission of 0.5% may be payable for all other schemes (viz., time deposits, MIS and NSC (as against 1 per cent paid currently)).
The Committee has put up (Page 75 - 7.3. Commission payable to Small Savings Agents) as follows :
The Committee therefore recommends that under PPF, the commission should be abolished. Under PPF, 90% of the transactions are happening through banks and for banks commission is not payable for any other scheme of theirs. The Committee feels that 4% commission under MPKBY is very high and is affecting the viability of NSSF. The Committee recognises that the RD scheme requires considerable effort on part of agents in mobilizing monthly deposits. However, 4% commission is distortionary and expensive. The committee recommends that this should be brought down to 1% in a phased manner in a period of three years with a 1% reduction every year. Under SAS, while the commission for senior citizen saving scheme is 0.5%, it is 1% on other scheme. The Committee recommends that while commission should be abolished on Senior Citizen Saving Scheme, on other schemes, it should be brought down to 0.5%.
Being into Investments Advisory and Agency business for more then 20 years now, and through past interactions with other fellows in similar business, I feel that a large no. of our fellows are also engaged in distribution of Small Savings Schemes (Post Office Schemes – NSC, MIS, SCSS 2004, RD, etc.).
The proposed changes, will adversely effect the business models of all such fellows.
Towards this, feeling internal responsibility, we have set up a blog – smallsavingsindia.blogspot.com for all concerned fellows to post their views on the proposed regulation so that some strategy can come out.
All concerned are welcome to visit smallsavingsindia.blogspot.com and post.
Thanks & Regards,
Bharat Bhushan
It is common knowledge that part of the commission 50% to 75%, is transferred to the investor by the agents, depending upon the invested amount. This loss is made good by the State Govts thru incentives to the agents. By reducing the commission, the agent may not be able to offer to the investors but will get incentive money from the State Govts. So there is no loss to the agents. Abolition of commission on SCSS and PPFis not in the right direction since not many investors in these catagories.
ReplyDeleteThe government / regulators are very much worried about the very small percentage of remuneration to the agent. They do not see the efforts and the result of the agents, who brings lakhs and crores of the common man's savings. But the same time On the other side lakhs and crores of rupees are looted by the same governing peoples through various forms. Who will regulate / punish them.
ReplyDeleteThe comment mentioning about the efforts, toiling,looting etc., etc., are purely sentimental. Take the case of IFAs engaged in MF industry. They also expressed the same sentiments. These IFAs brought laks and lakhs of small investors and made MFunds as a viable industry. Now they dont get anything and they have to beg for commission.
ReplyDeletePl. Note: The next target is the agents in the Insurance sector.
It is unfortunate that authorities one after the other are serious about disbanding the network of
ReplyDeleteretail advisors which is not good for small investors or Govt. which should promote retail savings. They have certainly ignored the huge amount of efforts put up by us. Definitely we hv to take it up with the concerned authorities unitedly.
L.Kumaar AR$N 0037
The committee Recommendation is verymuch affected the small savings agents future aswell as income. many of our agents life is depended only from this commission.Our Govt is not consider the people's life.All over India small savings agent's are very much affect,if the Recommendation is accepted by the Govt.This commission expenditure is nothing to our govt compare to 2G,aadarsh,swiss money,kalmadi scams.Kindly take the issue as a serious one,and save the life of our community. G.Chandra kumar
ReplyDeletePPF agent
Tamilnadu.
It is really painful on the part of the agent community who canvass huge business for the Post Office Schemes.
ReplyDeleteRegarding RD we collect the meoney, preparation of list Date,Pass book entry & we handover thro CD. Simply they copy our CD & we complete their 90% work.
In Post Office no one is working for the agent. We have to wait patiently to complete the transactions.
Because of the RD only the Post Office is able to run the show.
Because of the interest rate hike no Monthly Income Scheme we receive from the investors
Senior citizen scheme is also good only for the 9% interest.
The govt should continue the Commission structure for RD 4% Plus 2% and other schemes minimum 1% should continue.
There is a huge retirement in July 2011 There is no appointment in the retired area.
We all will assemble to request the govt to consider our demands. God is great.
Radha krishnan.K.K.
ARN 5613
Large number of persons are engaged as Small Saving Agents. Reduction and eventual abolition of commission is a blow to these people. Most of them are engaged in this profession for many years. I have a suggestion:
ReplyDeleteThe postal Dept is a Govt. entity. It should not leave these dedicated people and their families to suffer. The department can absorb them as Extra Departmental Officials. Norms can be decided depending upon the years of service, no of depositors and the amount of business each has brought in.
Dear Bharatji,
ReplyDeleteThanks for highlighting this matter that has recently come up. I am sure most of our fellow advisors will not be aware of these developments.
Historically, Govt. of India has been coming up with schemes and processes that are economically not viable. These were necessary during the post independence era, but their existence and basic fundamentals remains the same even after 60 years. Its high time that these are mordernised to to the changing times. Post office schemes are one such examples of bureaucratic lapse. The changes should have been done much earlier, but nobody was willing to do that. I justify the changes being proposed due to following reasons -
1. Most of the agents involved in selling post office schemes do not understand ABC of investments. With changing times, a plethora of new investment opportunities have come up. It is important for an agent/advisor to know the products that they are selling to the investor so as to do the right selling. However, these products are sold by such agents by giving rebate to the investors from their commission. I know agents giving rebate in PO RD also. When they can survive by giving rebate, they can also survive with less commission. No wonder, there is no respect for the agency force in the eyes of the investor(s).
2. There is wide spread corruption in post office, which is known to everyone. Every agent has to give monthly HAFTA to the post master and sub post master to get things done speedily. Agents not giving bribe or not giving adequate are harassed. Not only this, there is a wide spread practice of putting all the direct business coming in the post office on some agents' code, which then gets shared between the post master and the agent, thereby looting the exchequer. Essentially, post office employees are making good money due to this commission structure.
3. In case of PO RD(MPKBY), Govt. is giving 7.5% return to the investor and 4% to the agent. This means that the outflow for the Govt. on this deposit is 11.5% p.a., which is astoundingly very high. How the govt. can sustain this is anybody's guess. The same money can be borrowed by Govt. from World Bank or IMF @ mere 5% p.a., why should it borrow from individuals at such a high rate. Further, it is not that vast majority of people are dependent on this interest income for their living. For more than 90% of investors, postal RD forms less than 5% of their investment portfolio, which makes little or no difference to their day-to-day lives. Its high time that we should now start looking at national objectives also, rather than looking at our individual needs only.
4. Last, most of the people investing in post office schemes are parking their black money. As our economy is moving closer towards global integration, it is very important to curb this menace. We all want our politicians to declare their black money, but when it comes to us, we do not want to take the right steps. There is an age old saying, 'Charity begins at home'. High time we should apply this in our personal lives.
I am sure my above comments will be against the vast majority. However, this is how I view this issue and I am seriously open to comments on my view as I am sure there can be some perspective that I would have missed.
Dear Mukul,
ReplyDeleteWhile the comments are welcome, they may not be upto the mark at certain places.
Most of the agents involved in selling post office schemes do not understand ABC of investments ! What is ABC of investments ? Please elaborate.
Where have you found that Post Office Agent will not be knowing details about the post office schemes ? Similarly if a so called Mutual Fund Agent or Stock Broker does not know full details of Post Office Schemes, it should be declared that the person (there are many) does not know ABC of investment.