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The United forum of Banks’ Unions (UFBU) representing workmen and officers in banks had been requesting the Indian Banks ’Association(IBA) to allow another option to those who were in the service of the bank prior to 29 September 1995 in case of Nationalised banks and prior to 26 March 1996 in case of associate banks of SBI and continued in the service on or after that date and did not opt for pension as per the scheme. The previous Chief Executive Officer of IBA, Mr. H.N.Sinor, turned down the request for second option for pension to 280,000 remaining employees on 1 December 2007 on the grounds that the additional burden of Rs. 26000 crore approximately, in addition to foregoing around Rs. 9500 crore by banks’ contribution to PF for these employees would be on PSU banks. However, no sooner Mr. Sinor retired, than the present CEO, Mr. K. Ramkrishnan again entrusted the work of re-calculation of pension cost to 337,000 employees (272,000 serving + 65000 retired) to two new actuaries at the request of employees’ organisation in 2008 and supplied basic data as on 31 March 2008. These actuaries worked out the cost of second pension option to 337,000 employees at Rs. 6381 crore as against Rs. 26000 crore approximately for 280,000 employees as estimated by the earlier actuaries.
Based on the above calculation, the joint note was signed by the IBA on behalf of public sector banks with employees’ organisation on 27 April 2010 to grant second pension option to employees (existing + retired) who did not earlier opt for pension as per 1995 pension regulation. However, it is a matter of surprise that when the settlement was put to implementation, the actual cost went up to Rs. 24381 crore approx. as per the figures published in the audited balance sheets of 19 public sector banks as on 31 March 2011.
Thus it will be seen that pension cost has gone up by Rs. 18000 crore approx. (Rs. 24381 crore – Rs. 6381 crore) , i.e. by nearly 382% more than as per settlement amount which is unheard of in any wage settlement. This amount of Rs. 24381 crore would have gone up further, had the Hon’ble Finance Minister agreed to IBA’s recommendation to pay pension arrears from 31 March 2008. However, Hon’ble Finance Minister agreed to pay the arrears only from 28 November 2009,i.e. he cut down the period of pension arrears by 20 months. Further as against 65000 expected retired employees, only 45000 retired employees opted for the pension as per the information given by the IBA to RBI.
All the above clearly indicates that the present management of IBA who signed the above settlement on behalf of all PSU banks clearly joined hands with the employees’ union and the actuaries and deliberately kept the expected liability at Rs. 6381 crore, a very negligible amount as all the working top management officials of the nationalised banks, some of whom are part of IBA team, were equally interested in getting the second pension option cleared from the Finance Ministry. As such, this dubious role of present management of IBA tantamount to committing a big financial fraud on PSU banks totally ignoring Government of India’s interests, which owns the PSU banks.
The IBA further managed to get the approval from the RBI to amortise the additional amount of liability over a period of 5 years to enable them to show more profit, though this is contrary to pension settlement, as 70% of the liability was to be borne by the banks in one go and 30% by the employees. While banks were allowed to amortise the liability over 5 years, the employees’ contribution was recovered in one go. This action of amortising the pension liability over a period of 5 years has resulted in putting the Employees Pension Fund Trust into big financial loss permanently as they have lost the opportunity to invest the funds of Rs. 18000 crore in a profitable manner. Hence it is suggested that banks should provide these funds by dipping into general reserves instead of amortisation by obtaining RBI / Government approval and till such time compensate the Pension Trust Account @ 12% p.a. interest.
When I asked IBA ‘how all above mismatch has taken place’, IBA has washed off its hands on the plea that they are not covered under RTI Act 2005 and did not reply to my queries. When I reported this matter to Governor, RBI, the DBOD department replied that they are not party to this settlement, which is a very casual reply. Hence I am unable to understand how the learned chairmen of PSU banks have not questioned the IBA management for the above big financial fraud committed on PSU banks and have not sought clarification as to how work of pension settlement was entrusted to IBA without any accountability / responsibility on the part of IBA and its officials, especially when the liability has fallen on PSU banks
The major burden of second pension option i.e. 82% is on account of working employees and only 18% on account of retired employees (as against 20-25% is on account of retired employees as reported by IBA to RBI).
In spite of this small quantum of pension liability on account of retired employees, the IBA has played mischief of exclusion of VRS optees (other than those who opted for VRS under the 2001 VRS) from second pension option who are hardly 2500 in number and the total net liability on account of these retired senior citizens would be hardly Rs. 1500 crore, which is very negligible as compared to the benefit granted to working employees. This mischievous action of IBA is against all canons of equity and natural justice and clearly proves that it succumbs only to pressure without any concern for the miniscule minority of VRS optees( other than the optees under special VRS 2001).In this context, the IBA and the managements of PSU banks would do well to recall that this miniscule minority did not have the benefit of the “Golden Handshake” and to add insult to injury, have now been denied the second option too. Apart from this, they have granted second pension option to special VRS optees of 2001 who were sent out by the PSUs under the `golden handshake scheme’ which was designed with the purpose cutting out the flab of the PSU banks. The IBA chose to reward those who were considered unwanted in 2001 and punished those who had taken VRS without any additional benefit. The barest minimum the IBA could have given to the normal VRS optees is the second pension option. This action clearly indicates the discriminative policy adopted by the IBA management scheme against the normal VRS optees.
This action of IBA in excluding the normal VRS optees who retired under the scheme formulated by the the banks’ board, approved by Govt of India and the RBI, which is a statute, has resulted in the filing various writ petitions in various high courts by these VRS optees who are mostly senior citizens. Since the writ petitions in the high court’s is likely to take a number of years to be heard , by which time many senior citizens may not be alive to opt for the pension, it is high time that the finance ministry looked into the issue urgently and helped the senior citizens by instructing the IBA to grant them second pension option without any delay, effective from 28 November 2009 to ensure justice and fair play.
The views expressed above are my own and personal and I solicit comments from the readers in the matter and post their views on the email id ramans1938@gmail.com
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Mr. S. Ramachandran is a former General Manager Bank of Baroda, former chairman and CEO of Sangli Bank Ltd, now merged with the ICICI Bank Ltd., former administrator, Madhavpura Mercantile Co-op bank, Ahmedabad, former Director General of Mahratta Chamber of Commerce, Industries and Agriculture, and former visiting faculty to NIBM,Pune , I Bankers’ Training College,RBI Mumbai and FEDAI,Mumbai
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