Reduced commissions to hit women agents selling post office saving schemes the most

In a bid to win back small savers, the government recently announced hike in interest rates on various post-office savings schemes. It also announced that it will implement the recommendations made by the Shyamala Gopinath Committee on reform of the small savings fund.

But over 6 lakh agents who sell schemes like the post-office recurring deposits, the monthly income scheme and the public provident fund fear that they may have to cope with a drastic reduction in their income if commissions on these schemes are reduced, as proposed by the committee. One of the committee's proposals is to reduce the commissions paid to agents on the post-office recurring deposits from 4 per cent to 1 per cent.

Data from the government show that all small savings schemes put together collected Rs 2.51 lakh crore on a gross basis in 2009-10. The post-office savings account was the biggest contributor bringing in Rs 68,000 crore on a gross basis, followed by the Monthly Income Account (Rs 54,300 crore) and the recurring deposit (Rs 30,353 crore). Distributors estimate that a typical agent selling post-office schemes earns about Rs 10,000 a month in the big cities, Rs 5,000 in towns and about Rs 2,000 a month in rural areas. The agent force for some schemes such as the post-office recurring deposits is dominated by women.

In Tamil Nadu for instance, of the 32,000 agents, 8,200 are standard agents, while the remaining are womenfolk belonging to the Mahila Pradhan Kshetriya Bachat Yojana (MPKBY). Last year, the Tamil Nadu circle collected Rs 13,414 crore of which monthly income schemes accounted for Rs 2,632 crore and the postal recurring deposits Rs 2,160 crore.

Industry sources say that the low interest rates on small savings schemes even as bank deposit rates have gone up, have prompted investors to shift to the latter in recent years. This has resulted in the agent force for post office schemes depleting.

In Tamil Nadu, more than 8,000 agents are estimated to have moved out of the business in the past few years due to lucrative commission elsewhere. If the commission on recurring deposits is cut, agents fear that the average monthly income of the women agents will fall sharply. The effective reach of the post office network will also not be utilised. There are 1.5 lakh post offices in India with 80 per cent of the branches located in unbanked areas.

sureshpartha@thehindu.co.in