BEFI Letter to Finance Secretary Pension Scheme of Bank Employees and Officers
BANK EMPLOYEES FEDERATION OF INDIA
NARESH PAUL CENTRE
53 Radha Bazar Lane (1st Floor), Kolkata – 700 001
e-mail: pradipbefi@yahoo.co.in website: www.befi.in
(Ph): 033-22254414/22365108 (M)9433144271
Circular No.72/2020
To all Units, Affiliates, Office Bearers, CC & GC Members
27th October 2020
Dear Comrade,
Letter to Finance Secretary on Pension Scheme of Bank Employees and Officers
Major number of organisations belonging to the financial sector including SBI, Commercial Banks, RBI, RRB, Insurance, within a joint platform in the early part of 1990s, started demanding for introduction of Pension as third retiral benefit in addition to contributory provident fund. On behalf of this joint platform, many action programmes took place including strikes. But, Pension was introduced for the employees and officers of the Banking Industry, in lieu of Provident Fund, as per agreement signed on 29.10.1993 and implemented according to Bank Employees Pension Regulations 1995, leaving behind the RBI, Insurance and RRB Sector. In RBI and Insurance, the Pension system was introduced subsequently; while the RRB employees had to fight a long battle, both organisational and legal, to achieve benefits of Pension.
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The Pension Regulation did not consist of any provision for updation / revision of pension for the bank employees. Bank employees’ pension remained to be revised all these years in line with the Central Govt. employees. In RBI, Pension has been revised in 2019 following protracted struggle by all organisations. For obvious reasons, a substantial number of bank employees and officers across union affiliation did not opt for pension initially surrendering provident fund. We may recall that in 1993 BEFI, though formed in 1982, was not a party to the industry level negotiation process. After certain period, we raised our voices for another option of pension, which ultimately was achieved through years of joint struggle and actuarial exercise at the intervention of UFBU.
The banking fraternity had been demanding for enhancement of family pension and revision of pension for quite some years. In regard to enhancement of family pension, the IBA agreed to enhance family pension in principle during the ongoing negotiation process subject to approval of Govt. of India. In regard to updation/revision of pension, the IBA and the Govt. of India are reluctant in settling the issue even after pension revision in RBI. We have written a letter to the Secretary, Ministry of Finance today. Text of the letter is appended below.
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With greetings,
Yours faithfully,
sd/-
(Debasish Basu Chaudhury)
General Secretary
TEXT OF THE LETTER TO THE SECRETARY, MINISTRY OF FINACE
QUOTE
You must be knowing that Pension Scheme of the bank employees, effective from January 1986 as per Bank Employees Pension Regulation gazetted on 29th Sep 1995, has not been revised ever since. Even the family pension has not been enhanced from its paltry amount despite assurances from competent authorities. We don’t consider it necessary to elaborate about the resultant effect this phenomenon brought to the pensioners and surviving spouses for having a decent living after serving the country and its people for several decades.
The bank employees and officers, both working and retired, are demanding for updation / revision of pension since long without any positive effect so far. We understand that the Pension Scheme had not been revised as was being done for the Central Govt. employees periodically and recently effected for the RBI employees, mainly, for two reasons. Firstly, apathetic attitude adopted by the Ministry of Finance, Govt. of India and more importantly, apparent improper management of the Pension Fund.
A few years ago, in the Lok Sabha, while answering a question on bank employees Pension, the Hon’ble Minister of State for Finance told inter-alia that, “the Govt. is not considering to modify the pension scheme to bank pensioners as available to Central Govt.” (unstarred Question No. 526 dated 26.02.2016). Moreover, the IBA, time and again, pleading with unavailability of sufficient fund for pension revision. Such plea is being taken over the years without even bothering for calculating the required load and also not inclined for examining management of the pension fund as per pension regulation.
In the prevailing circumstances, we are placing before you some relevant matters related with much coveted pension revision of bank employees and officers pending for a long time.
1. The existing pension scheme in respective bank under regulation flows from an agreement dated 29.10.1993 and made effective from 01.01.1986. The Pension was agreed upon only as a second benefit i.e. in lieu of Contributory Provident Fund. Accordingly those who opted for Pension were made to refund the entire amount of the bank’s contribution to provident fund including the interest accrued thereon along with further interest of 6% per annum on such amount from the date of settlement, of the Provident Fund account till the date of refund in terms of Clause 3 of the Bank Employees’ Pension Regulations 1995. The amount so collected from the optees was also transferred to Pension Fund as per Clause 6 of the Regulation.
2. Clause 12 of the Pension agreement dated 29.10.1993 reads “Provisions will be made by a scheme, to be negotiated and settled between the parties to this Settlement by 31st December, 1993 for applicability, qualifying service, amounts of pension, payment of pension, commutation of pension, family pension, updating and other general conditions, etc. on the lines as are in force in Reserve Bank of India.” Quite surprisingly, this Clause did not find place in the Regulation enacted in 1995.
3. In pursuance of clause 12 of the agreement dated 29.10.1993, total 58 banks adopted the Pension regulations 1995 in their respective boards with prior sanction of Govt. of India and in consultation with Reserve Bank of India, in exercise of the powers conferred by Clause [f] of section 19 of the Banking companies [acquisition and Transfer of undertakings] Act 1970 [5 of 1970] as notified by the Govt. of India. In spite of unambiguous understanding for updation of pension reached in agreement, Bank Pensioners were denied revision of pension while regulation was framed leaving behind the understanding reached on 29.10.1993. In view of this conflicting position between an agreement and Pension Regulation, demand for Revision of Pension for all the Pensioners from respective dates of their eligibility in line with the pensioners of RBI is justified and legal, particularly when revision of Pension for RBI pensioners has already been implemented.
4. It is admitted that revision of pension requires detailed actuarial calculation which may require some time. But during the whole three years of negotiation for the ongoing settlement, IBA did not come up with positive view though expressed that impact analysis is required to understand the load factor in the individual Banks but did not take initiative for any calculation. We had our experience regarding the ‘Record Note’ signed in 2015 which promised that the Pension related issues would be reviewed but never taken up for discussion during last five years or so. As IBA is reluctant in settling the legitimate demand, intervention from your office is urgently necessary.
5. It is quite important to have thorough review of managing the Pension Fund during the last quarter century of forming the pension fund which is supposed to be governed by extant provisions of the Bank Employees’ Pension Regulations 1995 as amended subsequently. We would like to submit some issues for your perusal and taking necessary action which, to us, are integral part of pension revision. Meanwhile, we came across several papers/documents available from replies of different banks to queries under Right to Information Act 2005 which are having relevance with subject matter.
6. Clause 11 of the Pension Regulation lays statutory obligation on the bank for Actuarial investigation of the Fund, which says “The Bank shall cause an investigation to be made by an Actuary into the financial condition of the Fund every financial year, on the 31st day of March, and make such additional annual contributions to the Fund as may be required to secure payment of the benefits under these regulations : Provided that the Bank shall cause an investigation to be made by an Actuary into the Financial condition of the Fund, as on the 31st day of March immediately following the financial year in which the Fund is constituted.” The unavailability of such investigation reports of Actuaries in public domain have caused apprehensions whether investigations were made as per Regulation and necessary actions were taken during the period.
7. It has been in the media that some banks have made investments of Pension funds in violation of Regulation 12 regarding Investment of the Fund which says , “All moneys contributed to the Fund or received or accruing after that date by way of interest or otherwise to the Fund, may be deposited in a Post Office Savings Bank Account in India or in a current account or in a savings account with any scheduled bank or utilised in making payment of pensionary benefits in accordance with Pension Regulations and to the extent such moneys as are not so deposited or utilised shall be invested in the manner specified in sub¬rule (2) of rule 67 of Income Tax Rules, 1962”.
It may not be out of context to mention that a Starred Question No. 354 was raised in Lok Sabha on 04.01.2019 on ‘misappropriation of Employees Pension Fund Trust and Gratuity Fund by the Punjab National Bank in the year 2016-17″; the then Hon’ble Finance Minister replied that “the PNB management informed that there is no misappropriation of funds, and that the pension fund and gratuity fund trusts are separate entities and the bank is not authorised to operate the trusts’ accounts or transfer any amount from the trust”. It was further stated that the bank (PNB) reported having initiated steps to further lay the reference received as well before the Audit Committee of the Board (ACB). Subsequent developments in this regard have not been made available.
Now, from reply under RTI Act 2005 given by different banks, it is clearly evident that quite a good number of Banks withdrew amount from Pension Fund apparently for purposes other than meant for which amounted to thousands of crores of rupees. We strongly feel that a thorough enquiry is required on such probable ‘irregularities’ and remedial action must be taken including compensating the Pension Fund if any erosion took place out of these.
8. Consequent on introduction of VRS in the year 2000, the public sector banks and IBA approached RBI for issuing guidelines on the accounting treatment in respect of VRS related expenditure such as ex-gratia payment and other terminal benefits. The RBI after examining the accounting issues in consultation with the Institute of Chartered Accountant of India (ICAI) suggested some measures. The RBI was of the opinion that though the banks were provisioning for terminal benefits on actuarial basis but in view of the early retirement under the VRS, it was possible that the amount of termination benefits payable might be more than the provision made in this respect in the past for the employees opting for VRS. It was further stated that the excess of termination benefits payable over the provision held in this regard, unless expensed in the same year, can be treated as extra-ordinary item and Deferred Revenue Expenditure (DRE) and the period of deferment would be restricted to a maximum of five years including the year of acceptance of VRS application by a bank. The RBI also suggested the basis of allocation of the DRE spread into five years. (Ref: BP.BC. 73/21.04.018/2000-01 dated 30.01.2001; Letter addressed to All Public Sector Banks by the Chief General Manager-in-Charge, RBI).
We strongly demand that a special audit be made to ascertain whether year wise allocation of DRE was provided as suggested by RBI. In case of departure remedial measures are to be taken.
In addition, the Pension Corpus was constituted and funded as per Clause 5 and Clause 7 of Pension Regulation. In reply to an unstarred question raised in Lok Sabha (No. 526 dated 26.02.2016), the then Hon’ble Minister of Finance commented that, “Pension to bank employees is paid in terms of Pension Regulations of respective PSB and not on the same model available in Central Government. The pension in Central Government is paid out of Budget provisions, whereas scheme in PSBs is a funded scheme for which Corpus is created during the service period of the employee”. It is observed from the available sources that disbursement from the fund for pension is much lower than interest accrued in all the banks for quite some time now. The pensioners are the sole beneficiaries of the total surplus, thus generated from which they should not be deprived.
Moreover, the bank employees and officers, dedicate their whole service period to the nation and its people. We are rendering service to the clientele in hardship areas and difficult zones notwithstanding the pains of our families while staying away from them. It is the bank employees who came forward in rescuing the people of the country at large during the days of Demonetization and Covid-19 pandemic, even risking their lives. These bank pensioners deserve honourable and decent living which can only be ensured by revision of pension. The Govt. can’t look the other way on plea of fund shortage. We are suggesting for joint actuarial calculating to assess the requirement of amount in extending pension revision to the bank employees as per RBI pattern. We further consider that if any additional amount is necessary for this, it is to be provided by the respective banks and/or Govt. of India as the scheme is akin to that available for central government employees and Reserve Bank employees in terms of Pension Agreement of 1993.
The demand of funding the shortfall by the Banks/Govt. is relevant in circumstances when the banks are supposed to provide astronomical amount from its balance sheet for writing off loans, for the willful defaulters, for resolution through IBC Code 2016, ever increasing frauds besides provisioning of bad debts lion’s share of which is due from the big borrowers as per accounting norms of RBI and Govt. of India.
In view of the foregoing, we firmly demand for a review of the whole state of affairs including the points mentioned herein above as well as undertaking thorough audits of the pension funds of different banks to ascertain that there is no violation in proper maintenance of the fund and initiate necessary steps for revision of pension in banks in line with RBI pensioners.
Source: BEFI