Wednesday, March 25, 2015

POST OFFICE MIS KILLED….CHIT FUNDS GREW

Over the past 4 years this segment have been killed and today their is no one to hear the pain of the investors who lost their funds doing investments in chit funds.Post office savings have been hammered and the UPA government spoiled and also prospects of growth of small savings. They have promoted indirectly Chit Funds to grow which will capture the small ticket size business. Post Office MIS used to be one of the best avenues for small savings promoting and also a relief for the senior citizens particularly when the bank interest was falling. But with effect from 1st December, 2011 the post office MIS was killed.

The post office agents for whom the Post office MIS was an avenue for earning bread and butter and also they are the key personnel for connecting the rural as well as the aged people with the Post Office MIS.  They connected every common man who was looking aggressively for parking their small savings –post office agents played a crucial role. Further these post office agents used to pick up and deposit the savings for the aged people and provided one of the efficient services to the end user. The whole of India was being served by these post office agents.

Prior to December 2011 these agents used to get 1% as commission for the MIS which was brought down to 0.5% from 31st December 2011. This created great loss for the bread earners and also the new ones who were planning to join –they even dropped down. The service slowly dried away and chit funds became a big player in the market. They took the advantage of regulation and played their won game.

Scams erupted only after 2 to 3 years from the day the commission for Post Office agents were scrapped. The looser at the end of the day is the consumer alone. Those people who knew less about savings and relied heavily on these post office agents were in deep waters once these agents moved out of the post office. Chit Funds came, exploited the market and made millions in their pocket. With the change of government suddenly these scams came into lime light and now the current governments are being blamed.
We discuss about income –inequalities and financial inclusion but how that inclusion would come riding on whose shoulders is never considered. In India we all know that intermediaries plays pivotal role for the success of any business and expansion and maturity of a market. When the government down have his own people to connect the gaps, neither could provide services to the aged and rural people who are less educated about investments and small savings. Then why UPA government did killed the commission system and eradicated a well established business which was promoting small savings and corpus for the government under the Post Office MIS.

Post office MIS agents played pivotal role in financial inclusion. They educated people about small savings and promoted creating large corpus over the long term. We need to bring back the 1% commission regime so that post office MIS gets back its flavour. This will also create independent financial entrepreneurs and would block the loophole of frauds and chit funds.

 Post office MIS is still one of the best avenues for promoting financial inclusion.   Giving lectures on the subject and abolishing the intermediaries is not the solution. One needs to think how this inclusion should be reached. When we start thing why then only we can get into how and where.

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