Committee for Comprehensive Review of NSSF Submits its Report to Union Finance Minister Recommends Discontinuation of Kisan Vikas Patra and Continuation of other Schemes with Suitable Modification(s); Recommends Reduction in the Maturity Period of Monthly Income Schemes and NSC. It also Recommends upward Revision of the Ceiling on Annual Subscription in PPF from Rs. 70,000 to Rs. 1 Lakh and Revision in Rate of Interest in Post Office Savings Account from 3.5% To 4% .

The Committee set up for comprehensive review of National Small Savings Fund (NSSF) headed by Smt. Shyamala Gopinath, Deputy Governor, Reserve Bank of India submitted its report to Union Finance Minister Shri Pranab Mukherjee in his office, here today. Other members of the Committee are Shri R. Sridharan, MD, State Bank of India, Shri Shaktikanta Das, Additional Secretary (Budget), Ministry of Finance, Dr Rajiv Kumar, formerly Director & Chief Executive, Indian Council for Research on International Economic Relations and currently Secretary General, FICCI and Shri Anil Bisen, Economic Advisor, Ministry of Finance. Earlier, the aforesaid Committee was set up by the Government after accepting the recommendations of the 13th Finance Commission in principle regarding examination of all aspects of the design and administration of NSSF with the aim of bringing transparency, market linked rates and other, much needed reforms to the schemes.

The terms of reference of the Committee, inter alia, included review of the existing parameters for the small savings schemes in operation recommending mechanisms to make them more flexible and market linked; review of the existing terms of loans extended from the NSSF to the Centre and States; recommending the changes required in the arrangement of lending the net collection of small savings to Centre and States; review of the other possible investment opportunities for the net collections from the small savings and the repayment proceeds of NSSF loans extended to State and Centre; review of the administrative arrangement including the cost of operation; and review of the incentives offered on the small savings investments by the States.

The Committee has examined all the small savings schemes, interest rates payable on them, their maturity period and other aspects. The Committee has recommended discontinuation of Kisan Vikas Patra (KVP) and continuation of all other schemes with suitable modification(s) in some of them. The Committee has recommended for reducing the maturity period of monthly income scheme and National Saving Certificate (NSC) from six to five years. Recognizing the need for a long term investment opportunity after discontinuation of KVP, the Committee has also recommended introduction of 10 years NSC scheme. The Committee has also recommended an upward revision of the ceiling on annual subscriptions in PPF from Rs. 70,000 to Rs. 1 lakh.

The Committee has recommended revision of the rate of interest in Post Office Saving Account from 3.5% to 4% and benchmarking of interest rates on other small savings schemes to rates of G-Sec of similar maturity with positive spread of 25 basis points with two exceptions. First exception is 100 basis points spread for Senior Citizens’ Schemes keeping in view its social objective and second exception is 50 basis points spread for newly recommended 10 years NSC keeping in view of its higher illiquidity. The Committee has recommended that these rates may be notified by the Government afresh at the beginning of every financial year based on the average yields on Government Securities in the previous calendar year.

The Committee has recommended that the mandatory component of investment of net small savings collections in State Government Securities be reduced from 80 per cent to 50 per cent. The balance amount could either be invested in Central Government Securities or could be on-lent to other States on basis of requirement or could be lent for financing infrastructure projects requiring long term finance. The Committee recommended that the tenure of these loans may be reduced from the current 25 years including moratorium of 5 years to 10 years. The Committee has recommended that these loans may be extended at 70 basis points higher than the average interest payment on small savings to the subscribers on the total outstanding stock in previous financial years.

The Committee has recommended for abolition of payment of commission to agents on PPF and Senior Citizens’ Savings Scheme and reduction of commission paid on Standardized Agency System to 0.5% from current level of 1%. The Committee has also recommend reduction in Commission payable under Mahila Pradhan Kshetriya Bachat Yojana on Recurring Deposits from current level of 4% to 1% in a phased manner over a period of three years. The Committee has recommended that the total cost of operation of NSSF should be contained within 0.7 % of the outstanding small savings.

The full text of the Report is as follows:-

Report of the Committee on Comprehensive Review of National Small Savings Fund (2 MB)

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  1. Sudhir Singhal says:

    Inflation in India is at its peak, but there is Govt. to take care of Govt. employees, bureaucrats and ministers because Govt. thinks inflation only hits these categories, that’s why Govt. takes care of them by increasing D.A. and other perks every year. In the eyes of Govt., small savings agents are not human that’s why they oppress them the most. Small Savings agents use to get 2% commission in 1988 which was then reduced to 1%, at that time petrol was around Rs.10/- per liter and milk was about Rs.6/- per liter, and now a days petrol is Rs.70/- per liter and milk is Rs.40/- per liter. And yet Govt. chose to take these horrible decisions to hit the agents.

    Government is hard pressed under deficit of budget and needs money and with out the help from agents how can Govt. raise funds to meet its requirement of funds to meet out the deficit, incomplete projects and to start new infrastructure projects which are necessary for the development of the country. Small Savings and PPF scheme are the most important, major and biggest source to raise funds for the Govt. Situation is grim and it only will worsen in coming days without agents.

    Mr. Mukerjee has failed to justify his decision by implementing Shyamla Gopinath report as he has created more than 5 Lacs unemployment overnight in one of the fastest emerging economy of the world. We just cannot create unemployment in the country and be counted as emerging economy. Look at U.S.A. and Greece and other sinking economies of the world, where are they heading if unemployment is created/ generated in their backyard. We hope we don’t end up like them.

    By implementing this one sided report which is completely based on myth, Mr. Pranab Mukerjee, Finance Minister has robbed more than 5 lacs agents and their families of their livelihood. This decision of Ministry of Finance will force many of the agents to commit suicide or to beg on streets. Agents who have dedicated most of their life to Small Savings, who are in this business for last 30 to 40 years, what will they do? No, this is not the job of Govt. Is not this the job of Govt.?

  2. Sudhir Singhal says:

    Report of Shyamla Gopinath committee is biased and influenced by banks and insurance sector to demote the Small Savings and its agents. Why any opinion of PPF investors or agents/agent associations was not sought by Shyamla Gopinath? An opinion of PPF investors should have been sought by the committee, whether, PPF investors need services of their PPF agents or not, as had been done by the Govt., before the implementation of Direct Tax Code in April 2012.

    Contrary to the report of Shyamla Gopinath, conduct a survey of PPF depositors and they themselves will tell the truth that 90% transactions in PPF accounts take place only through PPF agents.

    PPF is not an integral scheme of Nationalised Banks, PPF scheme had been established by Government of India under PPF ACT, 1968 (23 of 1968), therefore, question does not arise for banks to pay commission from their pockets to PPF agents (as mentioned in the report), since it is paid by Govt. of India

    Smt Shyamla Gopinath being the Deputy Governor, should have been aware of the fact that RBI which is the father of the other banks pays 1% commission on its scheme known as “8% Savings Bonds” erstwhile known as RBI Relief Bonds, and it is being sold through State Bank of India who is also handling PPF accounts. Mr. R. Sridharan, Managing Director, State Bank of India, who was an elite member of this committee, should have brought this fact to the notice of Smt. Shyamla Gopinath. But, he did not. Why? Hence, it proves the influence and lobbying of the banks to abolish the agent’s commission, and it is quite evident that commission has been abolished only on these two schemes which are being handled by banks.

    PPF agent motivates an investor with the promise to investor that he will be provided services by the agent for the next 15 years which is the maturity period of PPF account. Is not it cheating by the Ministry of Finance by abolishing the commission on PPF accounts which have been opened by the PPF agents and have maturity in coming 15 years? This is like getting your job done without paying to the employee. While it should have been like Insurance sector if an agent introduces a policy to insurance company an agent is assured of getting commission by the insurance company on all the subsequent subscription till maturity/survival of the policy.

  3. Pushp Kukreja says:

    If Govt reduce Agent Commission then Politician will enjoy this money by depositing this money in their swiss bank account..

  4. Pushp Kukreja says:

    If Govt will reduce agent commission then definitely Post office will lose their clients as all we know Govt work depends on Agent. No body wants to stand on long lines of post office as we know how the Govt employee works and definitely people move to Private Bank. As Govt already impose lots of restriction on Post office work. Actually they don’t want extend PO work.

  5. Ajay Vyas says:

    at one side the government is increasing the salary of govt. employees and the rates of daily use consumer goods are increasing higher and higher and beyond the control of govt., and the other side recommendation of committee to reduce the agents commission and abolish the comm. on some instruments are not justify. the govt. should not accept such recommendations. most of the agents are having only one source of income i.e. commission of post office agencies, if the govt. reduce the comm. then where the agents will go. and how they will earn bread for the families

  6. OM PARKASH says:

    If agent commission will reduce then agents will suffer very loss. Government is increasing salaries and giving increments to their employees but here plans to reduce earnings of agents.It is not good.

  7. ramanu says:

    in this scenerio lot of postal office agents who is taking responsibility of collecting the nsc ppf rd mis commission will be affected and they will suffer huge loss on their services >>.. presently u can notice in all post offices they are playing the vital role on rd and other savings schemes by assisting the public.

    post office are not so good like agents patience since they have enough job
    as clerical in counters >>> govt has to increase the staff members and counters in the post offices then only it will succeed.

    sorry for the nsc agents good services all these times.

  8. venakt says:

    This is a very good recommendation. When avenues for profitable investments in this inflationary age is shrinking It will be good if this recommendation is accepted by the government. It will be helpful to small investors.

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March 2024