F. No. 1-3/2017-PBI.
Government of India.
Ministry of Communications.
Department of Posts (PBI Division)
Dak Bhawan, New Delhi Dated 14th January,2022
OFFICE MEMORANDUM
Subject: Revised commission/incentive structure for "Distribution of Commission/incentive pay out to DOP for handling the work of IPPB"
The undersigned is directed to forward the revised commission/incentive structure for Distribution of Commission/Incentive pay out to Department of Posts for handling the work of IPPB duly approved by Secretary (Posts), placed at Annexure A for kind information and necessary action.
2. Circles are requested to circulate the same up to the last mile and bring it to the notice of all concerned (End Users) involved in providing IPPB services. Encl. . As Above
(Abhinav Pratap Singh) Director (PBI) 01 1 -23096208
Revised Commission/Incentive structure for "Distribution of Commission/Incentive pay out to DOP for handling the work of IPPB"
1. Introduction of Commission on Revenue Generating Transactions for DOP: Presently DOP is only earning commission for account opening. Even this commission is miniscule as most of the accounts opened do not fulfil the criteria for commission. Commission for transactions is entirely paid as incentive to end users. Whereas considerable efforts are made by Circles in promoting IPPB transactions, the same is not reflected in Circle performance.
Further DOP incurs substantial costs in distribution of IPPB services. Various CPMGs have suggested that a portion of the income accruing from transactions should be shared as Commission to DOP and should reflect in performance of the Circles as well. Accordingly, Committee recommends introduction of Commission for DOP on Revenue Generating transactions.
2. Circle Performance measure to include performance in IPPB operations: Share of DOP commission shall form part of revenue for the Concerned Postal Unit (Circle/Region/Division), the incentive shared to End Users shall be directly credited to their Bank accounts by IPPB. IPPB shall share MIS reflecting performance of Circle/Region/Division/Sub Division/Account Office/Post Office.
3. Differential Incentive/Commission Structure for Products and services provided by IPPB based on End User/DOP efforts: There is single Incentive slab/structure for all products and services. The committee recommends that going ahead PBI Division and IPPB shall classify every new service into one of two categories:
a. Products/Services where End User effort is not high: In case of such services DOP Commission from the revenue generated per transaction shall be higher as compared to the End User Incentive. For instance, Cash Management Services, Loan sourcing and other Counter Based services
b. Products/Services where End User effort is high: ln case of such services End User Incentive from the revenue generated per transaction shall be higher as compared to the DOP Commission for instance Distribution of 3rd Party Insurance, AePS, Bill Payment etc.
Committee recommends different rates of Incentive/Commission for these two types of Products and Services.
4. Notional Costing exercise to be undertaken by both IPPB and DOP: Committee felt that both DOP & IPPB should undertake study to assess the costs being incurred in providing services to each other so as to get realistic and quantifiable estimate of mutual inter-dependence. The same shall also address RBI's IPPB audit observations in this regard of maintaining an arm's length distances between the two entities. Even though as per Cabinet decision no transfer pricing for the use of DOP infrastructure can be imposed by DOP on IPPB till it transitions into a Universal Bank,
it is felt that notional estimates of costs being incurred by each entity for the other shall help in arriving at the true costs of provision of various services through the IPPB-DOP platform. From DOP side such cost items may include Costs associated with IPPB branches, Branding, DOP manpower costs in provisioning of IPPB services, Cash Management & Treasury expenses, Utility Payments etc. From IPPB side expenses such as those related to Smartphones and Bio-metric Devices when used for DOP transactions, Interchange and MDR charges for facilitating DOP Digital and Online transactions etc can be included.
Committee recommends that both DOP and IPPB should undertake a costing exercise on the lines mentioned above to arrive at notional costs being incurred in provision of services through each other.
5. Corrective Action to be taken in respect of In-active/Non-Performing End Users:
One of the major concerns raised by the members of the committee was the fact that very few End Users perform IPPB transactions on a consistent basis. It was informed by IPPB that almost 30,000 EUs have not done a single IPPB transaction in last 6 months. Further a high portion of End Users perform very few transactions in a given month. ln order to bring consistency in End User activation across the board and increase productivity of resources, the committee recommends that IPPB shall share data related to non-performing/low-performing End users to PBI division every month.
PBI Division shall share the data with concerned Circle, RB Division and Establishment Division for further action. In case it is found that the concerned Post office/End User is not performing on other DOP business parameters as well then Establishment Division/RB Division and the concerned Circle shall initiate process of relocation of the Post office to an area where there are opportunities for business generation. Further in case it is not possible to relocate the post office then steps for relocating the concerned staff to other post offices should be undertaken so as to optimize resource allocation and increase resource productivity. Concerned Divisional Head shall be responsible for ensuring that
all End Users are performing transactions and are active. SSPOs/SPOs shall also be responsible for taking corrective action regarding relocation of Post Office/End User within a month.
6. Slab-wise incentive structure for end users:
ln order to increase number of revenue generating transactions and motivate low performing EUs and also to optimize IPPB's expenses on SIM and MDM the Committee recommends Slab wise incentive structure for the end users. It is also expected that through such an Incentive structure High incentive earner may be given differential treatment such as recognition programme which will increase motivation in both DOP & IPPB.
The monthly minimum benchmark is proposed to be 25 revenue generating transactions (Also required for qualifying as active end user). If L0 does <= 25 Revenue Generating Transactions in a month If L0 does >25 Revenue Generating Transactions in a month
7. Commission to DOP on CASA Balances: Based on the data provided by IPPB it was observed that at present the quality of acquisitions is poor and there is minimal post sales communication/contact and service with customers. This is reflected in the low CASA balances in the customer accounts which is an average of about Rs 550 which is very low. The key reason provided by IPPB for low balance in accounts has been absence of incentive to end users/ DOP on balance build up.
Accordingly, it is recommended to share Commission with DOP on the incremental balances maintained in the accounts. This can also increase the focus on POSA linkage and is expected to lead to Quality account acquisitions.
8. Revised Incentive/Commission Structure: The final Incentive/Commission structure recommended by the Committee is brought out in Table 1 and has following salient points:
a. Share of Incentive/Commission from IPPB to DOP for Income Generating Transactions is increased from 30% to 40%.
b. Products/Services where End User effort is not high, DOP's share of Commission shall be 80% of the Incentive/Commission shared and 20% shall be distributed as Incentive to End Users at L0, L1 and L2 levels. ln such cases Incentive percentage at L0 level shall be 15% of the overall Incentive/Commission shared by IPPB per transaction.
Similarly, at L1 and L2 levels the incentive percentages shall be 3% and 2% respectively to ensure Service Quality
c. Products/Services where End User effort is high, DOP's share of Commission shall be 20% of the Incentive/Commission shared and 80% shall be distributed as Incentive to End Users at L0, L1 and L2 level. ln such cases Incentive percentage at L0 level shall be 65% of the overall Incentive/Commission shared by IPPB per transaction. Similarly, at L1 and L2 levels the incentive percentages shall be 10% and 5% respectively to motivate sales.
d. Incentive/Commission structure of IPPB with other BCs (Individual/ Corporate) to be at par or lower than that of DOP:
Committee was informed that IPPB intends to onboard other BCs (Corporate/Individual) going forward. Committee recommends that the Incentive/Commission shared by IPPB to other BCs shall not exceed that shared with DOP (Inclusive of the additional and campaign based incentive paid to DOP in total - campaign based incentives shall be inclusive) in order to ensure that DOP network transactions are not diverted to other BCs.
Based on the above recommendations following incentive structure is proposed. 1: Proposed incentive Structure: Please view the image
** End Users and L1 L2 Incentives shall only be paid out in a month if Incentive amount is >=Rs160
# Acquisition incentive is payable only subject to full recovery of the Upfront Annual Account Maintenance Charges at the bank's end.
No Incentive payable on opening of Saving account which does not meet above criterion.
Table 2: Classification of Products and Services
Note: These incentive recommendations will supersede all the existing incentive guidelines from the date of implementation of these guidelines. The incentives on acquisitions will continue as per the existing process till the Pre-priced accounts variants are introduced by IPPB.
