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Friday, September 22, 2017

Good Initiative By Ex-Banker

C N VENUGOPALAN  Former Director ( GOI Nominee) State Bank of Travancore & Ex Manager Union Bank of India
 “Nandanam”, Kesari Junction, North Paravur, Kerala -683 513   
Mob: 9447747994    
E – Mail:
No.170826                                                                                                                26th August, 2017

The Hon’ble Minister of State for Finance,
Government of India, Ministry of Finance,
New Delhi – 110 001

Through: State President, Bharatiya Janatha Party, Thiruvananthapuram, Kerala 

Respected Minister, 

A better lease of life for bankers and retired bankers in India by the government

Bankers and bank pensioners in India had been a deprived lot for the past many years. Though they are the people who translate all financial policies of the government into reality thus  actively participating in the process of nation building, they are denied adequate compensation for labour and pension. Even the statutorily vested benefits and pension are denied to them though the payment is out of their own money. 

On the basis of wrong inputs and information given by Indian Banks’ Association the erstwhile governments were under a wrong impression that improvement in pension to them will affect the profits of banks.  Unfortunately, the current government also could not decipher the issues in the right perspective and is reluctant to undo the malady done to bank employees. The senior citizens who retired from banks are hence denied their legitimate benefits in derogation of the statute.  It is pertinent to point out that paying the statutorily granted pension involves no cost either to banks or to the government.  The money is payable out of the Pension Funds which comprise their own  deferred wages. 

  The following needs special mention:-

1. Pension in banks is payable out of Pension Funds and hence the payment does not affect the profitability of banks nor does it require any budgetary allocation on the part of the government.

2. Pension Funds are built up of contributions which banks were previously to make to CPF of employees as statutory contribution pursuant to EPF and Miscellaneous Provisions Act, 1952.  Hence Pension Funds are the statutorily deferred wages of employees and not the money of banks.

3. Money in Pension Funds cannot be utilized for any purpose other than payment of pension / family pension in accordance with the regulations.  ( regulation 5.2 )

4. Pension Funds of all Public Sector Banks (PSBs) are abounding in resources.  All banks have annual growth in Pension Funds which can easily foot two to four times the present pension to all their pensioners. Government can collect the data from all PSBs in the accompanying format and ensure that the statutorily defined pension can be paid with improvement.

5. In spite of truth contained under clauses 01 to 04 above, in relation to unstarred question No.2444 by Prof. M V Rajeev Gowda, based on malicious and mischievous information from Indian Banks’ Association, your good office gave a wrong reply on 08.08.2017 in Rajya Sabha, that improvement in pension would directly affect the profits of banks. The further statement that pension is payable based on Bipartite Settlement between IBA and Unions of employees/associations of officers also was inaccurate as the payment is statutory, on the basis of the Bank ( Employees’) Pension Regulations, 1995

6. Total Pension Fund of all banks is reportedly around Rs. 2,00,000 Crores now and the pay out of benefits is only 25 to 35 percent of the annual growth in Pension Funds.  Payment of higher pension as mandated by Pension Regulations is well sustainable.

7. Employees recruited after 31.03.2010 need not be serviced out of Pension Funds as they are covered by PFRDA Scheme of government.  Mortality of pensioners is also reducing the pension liability of banks.


a) When the Bank (Employees’) Pension Regulations, 1995 was notified in the gazette on 29.09.1995 calling for options for pension, majority of employees were kept out of it through a rigorous clause in regulation 22 (4) (b) providing for forfeiture of entire past service for participation in strike which would entail loss of Pension as also the earlier benefit of CPF in case of forfeiture of service.

b) When government directed IBA to advise member banks to delete the penal clause and to give effect to it vide its letter dated 24.12.1997, though banks amended the regulation, they did not give effect to it by offering chance of option afresh in the wake of the amendment thus disobeying the direction of the government, defeating the very purpose of the amendment.  Employees did not get the option mandatorily to be given.

c) A Joint Note dated 27.04.2010 was later signed by IBA with Bank Unions / Associations after thirteen years for granting an option afresh; but on purely unlawful conditions. The unlawful conclusions included :

Employees on rolls paying 2.8 times pay for November, 2007 to the Pension Fund of Banks. This was discriminatory as those who opted earlier had no such contribution.  Those who opted under the Joint Note and those who opted earlier are similar manner of people.

Retired employees had to pay back the CPF paid on retirement and 56 percent of it to Pension Fund of banks for getting pension from 27.11.2009, an arbitrary date in the settlement, in lieu of from the date of retirement.

This was in conflict with regulation 52 (1) of Pension Regulations in force as it provided for payment of pension from the date of retirement.  This apart, when CPF is paid back, pension the benefit in lieu of it shall flow from the date of retirement and not from the arbitrary date of 27.11.2009. This was discriminatory and opposed to Constitution as similar people who retired on different dates lost their pension for different periods from their dates of retirement to 27.11 2009.

Another glaring anomaly was that the contribution raised from employees at 2.8 times pay and 56 percent of CPF from retired were unlawful as the bank is the contributor to Pension Fund in terms of regulations 5 (3) and 11.  Though the bank appears to be the contributor, the real contributor is the employee himself as the amounts are the statutorily deferred wages entitled as management contribution to CPF.

d) The Joint Note was unlawful and has no force of law for the following reasons:

It was in the nature of amending the Pension Regulations to which it related.

Amendment to a regulation could be done only through notification in the gazette (section 19.1 of Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970/1980).  The Joint Note is not notified so far in gazette.

In terms of section 19.1.and 19.4 of the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970/1980 no amendment which prejudice what is earlier done under a regulation could be made.

It had to be laid in the Houses of the Parliament for their nod soon after it was signed, to give it force of law.  The Joint Note signed on 27.04.2010 is not laid in the Houses so far in spite of the passage of seven years as mandated by section 19.4 of the Act.

Clause 10 of the Joint Note stipulated compliance with the due procedure for amending the Pension Regulations pursuant to section 19 of the Act, but the condition is breached. 

It is on the basis of this Joint Note which the makers themselves breached and did not have force of law that banks raised the unlawful contributions to Pension Funds and denied pension from the date of retirement to 27.11.2009 to retired employees.  

e) The sanction of MoF given on 10.08.2010 to implement the unlawful Joint Note was ultra vires as MoF has no authority to circumvent the Pension Regulations which was  statutory being a dispensation of the Legislature.  The Joint Note is to be rolled back in any parlance to establish the equilibrium in the exercise of authority by the organs of democracy and for restoring the dignity of the Houses of the Parliament.

f) The amounts unlawfully collected and pension denied and detained had been lying in the Pension Funds of banks and earning interest income to them in the form of compound interest with the result that the PSBs stands in a position to repay them with such compound interest with no cost to banks.


Regulation 56 of Pension Regulations clearly states that Pension Regulations in banks is exactly on the premises of the Central Civil Pension Rules, 1972 and departure can be had only with specific sanction of Central Government.  The government has not so far permitted any deviation from regulation 56. But pension in banks is never revised ever since its inception when Central Civil Pension gets revised with each Pay Commission. This is in apparent derogation of the regulation and is done when Pension Funds of PSBs can pay two to four times pension to all with no cost either to banks or to government.  A General Manager who retired 15 years back gets a pension lower than that payable to his Clerk retiring now. The former is denied a life with dignity and in his case, the very purpose of pension ids defeated.   The denial of statutorily defined pension has no raison-d’etre especially when it has no cost implication to banks. 

What is all the more significant is that the bank employees had a better pay than in government during the seventies of last century when Pillai Committee Recommendations was implemented in banks on 01.07.1979 to stagger pay to establish parity with government pay.   The earlier higher pay was in view of added financial risks and extended working hours.   But the present plight is that pay of officers in banks is now lesser by Rs.40,000 to Rs.50,000 than that of the corresponding scales in government.   Since pension is linked to pay for employees on rolls and is never revised, bank pensioners are very much forced to walls.   This aspect deserves to be taken care of in the wake of the OROP sanctioned to defense pensioners.   It all indicates the imperative need for a Pay Commission for banks to determine compensation without any bias.

Last, but not the least, employees of nationalized banks are employees of government because of government ownership and they are the people who implement the policies of the government.  Though their pay and allowances could hence be paid out of the exchequer, as per the system, such expenses get adjusted against the profits they make in banks by themselves.   Section 10 (7) of the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970/1980 gives a prior charge to salaries and superannuation funds over the profits of banks by permitting the Board of Directors to declare a dividend and to retain surplus profits as reserves only after making due provision for them.  Whereas banks had been declaring dividends regularly without paying due compensation in banks and the erstwhile government was utilizing it to pay higher pay and allowances in other sectors, bank employees were continuously being exploited.   


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