Family pension revision and pension updation in Public Sector Banks

Pension Scheme was implemented in Public Sector banks in India in terms of Bank Pension Regulation 1995. Basic pension was fixed at 50% of the pay and allowances qualifying for superannuation benefits. Therefore, basic pension was crystalised on the date of retirement and increase in total pension was only on account of rise in DA. Wage Settlements in public sector banks take place every five years. Consequently, difference in basic pension was created in the same cadre of staff and officers due to different retirement dates and non updation of basic pension for last about 25 years though four wage settlements have taken place till date after introduction of pension regulation.

Such payment of indiscriminate pension in the same cadre is against the spirit of Article 21 of our constitution, which includes right to life with human dignity.

Moreover, as per Supreme Court judgment in the year 2015 pension updation and wage revision are inseparable. Many representations have been sent to Indian Banks Association, the apex body of banks for wage talks, to address the issue but with no improvement in the matter. AIBOC, officers’ body in wage talks, has also raised the issue.

Pension fund is built up by contribution of retirees from their superannuation benefits. Each bank is required to make actuarial estimates of funds position on the balance sheet date and contribute to the deficit, if any, which is presently about Rs. 300 cr total annually for all public sector banks. Pension fund corpus is about Rs. 2.60 Lakh cr. The cash inflow of CPF contribution from banks and earnings from investment of pension fund together is about Rs. 30,0000 cr against cash outflow for pension payment is about Rs. 20,000 cr. Now we discuss the issue of Family Pension improvement and Pension updation separately. Family pension for living spouse commences when the regular pensioner dies.

The basic pension is further reduced to 15%, 20% and 30% of original basic pay with a limit for maximum amount. Thus the pension amount is reduced further by about 50- 60% though the statutory payments outgo of surviving family pensioner remains same causing financial hardship.

Cash outflow from pension fund is reduced when regular pension is converted to family pension, but original contribution of the surviving pensioner to pension fund remains same. Further if family pensioner dies the original contribution remains in the pension fund.

So if family pension is improved by say 40 % it will always remain much less than the regular pension amount and no additional fund is required. Regarding pension updation the same has been implemented in Govt sector w.e.f 1st January 2016 with additional load on annual budget. In RBI also pension updation is done with merger of index point at 4440 last year.

As per latest estimates made by some retiree organization additional load (PVO) on pension updation for all retirees is about Rs.26, 500 cr. But if updation is done as per RBI pattern the same will be around Rs.13, 000 cr. Appropriate amount needs to be contributed by banks as per the size of their retirees in next few years. It is also a fact that Public Sector banks have incurred loss of about Rs 84,700 cr in 2017-18 and Rs.76, 400 cr in 2018-19 due to large scale slippages of asset and incidence of fraud. But the erosion in capital has been fully compensated by capital infusion from Govt.

As regards NPA position there is substantial cash recovery recently by bank’s own efforts and NCLT resolutions amounting to about Rs.75, 000 cr as cash recovery. During current year total combined loss of all public sector banks have been reduced to about Rs.3, 400 cr.

So there is improvement in profitability. Moreover, there is adequate cash surplus in pension fund as per cash flow and proper actuarial estimate is necessary to ascertain the affordable liability for updation of pension. But family pension improvement does not require additional fund from banks as is evident from the analysis.