The government's decision to raise the interest rates and slash agents' commission on a range of popular post-office saving schemes beginning Thursday will make small savings more rewarding for millions, but it has also triggered howls of protest from lakhs of agents whose income depends on selling these products.
The government has increased the interest rates on small savings instruments such as pubic provident fund (PPF) and post-office monthly income schemes effective December 1, but has slashed agents' commission in some schemes, while banning it altogether in a few others.
Under the new system, agents' commission of 1% for PPF scheme and 0.5% on senior citizens savings scheme has been discontinued.
On all other schemes such as monthly income scheme, national savings certificate (NSC) and term deposits, the commission has been halved to 0.5% from the existing 1% and the payment of 5% bonus on maturity of monthly income scheme has been discontinued.
The government has also decided to discontinue the Kisan Vikas Patras (KVPs).
"These decisions will result into substantial loss of earnings to more than five lakh agents," said Pawan Parkash Gupta, president, National Savings Agents Welfare Association.
The postal department runs small savings schemes that are a major source of borrowing by the government. These are increasingly losing sheen as the banks are providing attractive interest rates on bank deposits.
Most banks are offering 4% interest on savings bank deposits, with some lenders, after the freeing up of the rate by the Reserve Bank of India (RBI), offering a return of 6%.
The latest norms are based on recommendations of a committee headed by Shyamala Gopinath, the then deputy governor of the RBI, for comprehensive review of the government administered small savings.
The agents, however, said sharply reducing commissions is not a welfare-friendly measure.
"It's a pity that the government of India has recently taken such a decision which is soon going to put more than 25 lakh people countrywide in a position of total helplessness in earning their livelihood," said National Savings Agents Welfare Association in a memorandum to the government.