AIBPARC.....
Thank you for raising some of the vital issues about which there is lot of confusion in the minds of retirees in the Banking Industry. Our replies to your queries are as follows:
1..Whether it is truth that returns on pension corpus are sufficient to grant pension revision to Lakhs of bank Retirees .
Yes, the returns on Pension Funds of various banks are sufficient to take care of the facilities such 100% DA Neutralisation, Improvement in family pension and Even updation of pension.
The Corpus held by the Banks in Pension Fund is Rs,2,00,000 crore and even if a conservative rate of interest of 7% is given the Pension Corpus will earn an annual income of Rs.14,000 crore. Besides this there will be accretion from the employees retiring from the Banking Industry. Even if the payout on account of commutation is taken into account, the outgo from the Pension Fund is estimated to be around Rs.12,500/- crore.
This apart every Bank has to mandatorily make provisioning towards superannuation costs, including pension benefits, under Section 10(7) of Banking Companies (Acquisition & Transfer of Undertakings) Act 1970/1980, before announcing the profits or loss.
As a consequence the sustainability of the Pension Fund is ensured. It is reported that the total accretion on account of interest earning, accretion on account of retirements and accretion on account of mandatory provisioning etc.isRs.28,000/- crore per annum whereas the pension outgo is only Rs12,500/- i.e only 35% of the accrued amount is paid by way of benefit to the existing pensioners. It is estimated that the pension payment burden on account of Updation is Rs.3,000/- crore per annum, The burden on account of 100% D A Neutralisation is Rs.600/- crore per annum. The burden on account of improvement in Family pension is Rs.550/- crore. Hence, the the funds that accumulate in the Pension Fund during a particular year are enough to take care of the pension updation for 5 lakh pensioners in the Banking Industry.
2..Whether legally and rightfully Retirees are having absolute right to claim over the income on such funds .
Pension Fund is built up of contributions which the bank has to make compulsorily in conformity with EPF & Miscellaneous Provisions Act, 1952, Hence, Pension Fund is statutorily deferred wage of employees and not the money belonging to Banks. Money in Pension Fund cannot be utilised for any purpose other than payment of pension and payment of family pension as per Bank Employees' Pension Regulation No 5.2. Hence, the income earned out of pension fund is meant only for he pensioners and family pensioners and cannot be utilised for any other purpose.
3.. Is it true that the present accumulated balance in funds is only from PF transferred and banks have not contributed more.
The accumulated fund in the Pension Fund is on account of Statutory contributions made by the Bank in conformity with the provisions of EPF & Miscellaneous Provisions Act,1952 which was by way of Compulsory contribution to PF of the employee by the Bank. This apart, under Section 10(7) of Banking Companies (Acquisition & Transfer of Undertakings) Act 1970/1980, Bank has to make mandatory provisioning for Superannuation costs including pension Fund before decalring either profit or loss during a particular year. Thus the fund s held in Pension Fund is on account of the above process which means that Banks have made contributions to the Pension Fund as a statutory obligation. This is in fulfillment of the Bank Employees' Pension Regulations,1995. They have not contributed the amount as a charity but as a statutory obligation to ensure sustainability of pension fund.
4...Whether such surplus income can be utilised to pay additional pension even if there is no provision incorporated in Pension Scheme .
Please note that Bank Employees' Pension Regulations have made a provision for Up-dation of Pension under Regulation 35(1) and the funds earned out of the pension fund corpus can be utilised to meet the issues like Updation, 100% DA Neutralisation and improvement in family pension. It may please be noted that Updation of Pension has already been considered for the Bank retirees who retired from service of the Bank between 01.01.1986 to 31.10.1987, when the 5th Bipartite Settlement had taken place. The Formula for Calculating Up-dation has been given as Annexure I of the Pension Regulations 1995. This goes to prove the fact that the Banks are duty bound to revise, update the pension every time Bipartite Settlement takes place, and such benefits can be passed on out of the funds at the disposal of the Pension Fund of the Bank. This has been denied by IBA deliberately and the Associations and Unions were pre-occupied with another option for pension and the issue remained on the back burner.
5..Whether banks can decide such matters OR unless mater is cleared by FM/ govt nothing can be done.
Please note that Banks have no discretion or authority to decide such matters and they have to act strictly in conformity with Bank Employees' Pension Regulations,1995. As the Regulations which have been heavily borrowed from Central Civil Service Rules and Central Pension Rules 1972 and also the RBI Employees' Pension Regulations, Pension Updation and improvement in family Pension etc should be done automatically as and when wage revision takes place in the Banking Industry. After the Settlement is signed IBA has to send the proposals to Government of India for their approval. It is just a formality and so far teh Govt of India has not raised any objection for any os the settlements. Here, it is IBA which has played a spoil-sport. It may please be noted that RBI has already extended the benefit of 100% DA Neutralisation to its employees and family pension improvement with effect from 01.02.2005 and LIC of India has recommended to the Government of India for implementing 100% DA Neutralisation and family pension improvement with effect from 01.05.2005. In this background IBA has a very important role in this area and Govt of India will act on the advice of IBA. As all the issues of pensioners are backed by legal force, neither the Govt nor the IBA can withhold the facilities for long and now the time has come to realise our hopes and aspirations.
6...What are the rules for deciding Renewal premium of Too Up Policy being introduced now?
The Top Up Policy introduced now is like the IBA Mediclaim Policy. As per IRDA Guidelines, the adverse claim ratio of the previous year will be loaded to the premium of the subsequent year. If the Claim Ratio is not adverse the premium may remain at the same level as it is this year. You may refer to IRDA Guidelines under 10 (a) to 10 (d) the Insurance Company is permitted to load the next year's premium if the claim ratio of previous year is adverse. This year under IBA Mediclaim Policy the claim ratio has already hit 247% and is likely to increase further. Similar will be the case with Top Up policy if the claim ratio is adverse.
7..Whether UIiC can increase the premium in 2018 without any limit --say from present Rs 3500 to 6000/
The Insurance Company will increase the premium only if there is adverse claim ratio. If the claim ratio is not adverse there will not be any increase in the premium amount and the premium may continue at the same level. Please note that the Insurance Company is not supposed to raise the premium amount in an arbitrary, unilateral manner and any change in the terms of the policy including change in the premium amount needs to be notified to IRDA and get their concurrence for the hike.
8.. Whether Claim Ratio declared by UIiC in last two years is genuine or there are reasons to believe that it is calculated wrongly and hence increase in premium is unjustified.
The Claims position and Claim Ratio can be verified by anybody by approaching the TPA M/s.MEDIASSIST who are maintaining the Claims position. On the basis of the claims settled, we ca ourselves can arrive at the Claim Ratio. We have obtained the claims position as
well as Claims Ratio for the last two years and the figures arrived at by the Insurance Company is correct. As already mentioned
here-in-above, no Insurance Company can hike the premium amount unilaterally, as per their whims and fancy. They are bound by IRDA guidelines and the wrong or illegal actions of the Insurance Company can be challenged in the Court of Law or the Consumer Court. There are absolutely no grounds to believe that the premium is hiked in an Incorrect or wrong manner.
We have the experience of administering a Group Mediclaim Policy for 10 years from 2005 to 2015 and we are aware as to how the premium is fixed. We have witnessed live demonstration of calculation of the premium amount in the background of adverse claim ratio during the previous year. There is transparency and openness. Anybody can verify the records of claims, the Claims ratio arrived at by the Insurance Company. In July, 2017 the Insurance Company has placed all the facts before us and under Domiciliary Provisions the Companies have lost about Rs.14 crores and under Non-Domiciliary Provisions the loss is around Rs.23 crore. We must remember that no commercial organisation like an Insurance Company will run their business for incurring loss. The major ailments which hit the Insurance Company are Cancer, Heart ailments etc.
9... Whether collecting entire premium from Retirees violates guidelines issued by DFS in 2012
The Government of India issued Guidelines in February 2012 instructing the Banks to formulate a Medical Insurance Scheme for the retirees and the amount earmarked for the retirees in the Welfare Welfare Corpus, may be utilised to meet the premium under such policy. The Govt of India has not advised the Banks to bear the entire cost of the premium amount. The premium paid by us during the previous year was Rs.34 crores. As a consequence, the Bank is not in a position to bear the cost of premium amount of the retirees. It is pertinent to note here that no bank has considered the proposal of the employees to subsidise the premium amount. Only in State Bank of India, the Bank is paying a sum of Rs.6,000/- to each and every retired employee to meet the cost of the premium. Under Welfare measures, IOB and Syndicate Banks are giving Rs.3,000/- and it is Rs.2,500/-
The Government's guideline was nebulous and was not affirmative in nature
10. IF YES. Whether CBPRO has brought this serious violation to the notice of FM , if so any communication is available Or it is only oral submission made during meetings with Prakash Javdekar, SumitraMahajan Arun Jaitley?.
The Banks have not violated the Guidelines issued by the Govt of India. In accordance with the guidelines, IBA has formulated an Insurance Scheme for the retirees of the Banking Industry. Our Apex Body AIBPARC as well as CBPRO have addressed several letters to IBA
and Government of India to absorb the premium amount of the retirees. The issue has been highlighted before Madam Sumitra Mahajan, Speaker of Lok Sabha. She has expressed here sympathy for our cause. The issue has been brought to the notice of Sri.Arun Jaitley, who had given us audience on 2.06.2017 at his Office at South Block and impressed him about the need to subsidise the premium amount to the fullest extent.
We have pleaded for evolving a scheme akin to the Central Govt.Health Scheme, where any retired Central Government Employee can undergo treatment in any of the Multi-Speciality Hospital and walk out of the Hospital without paying a single paisa. Now it is learnt that the Central Govt. is seriously thinking to go for an Insurance Policy for the Central Govt Employees on the lines of IBA Medical Scheme. The Central Govt has already reduced its spending on Public Health. The minimum spending for health as stipulated by the UNO is 5% of the GDP and the Union Govt has earmarked only 2% of the GDP for Public Health, leaving the Public Health System in total doldrum. Because of this all of us are compelled to approach the Private Hospitals which are worried only about making profits and not bothered about providing good health care to the citizens of the country.
In this regard we entered into correspondence with IBA/Govt of India on umpteen number of occasions and you can just browse the website of AIBPARC and you will come to know what effort has been made by AIBPARC as well as CBPRO in pressing the Govt. to absorb the premium amount of Bank retirees. But we have not succeeded in clinching the issue and in the present scenario it looks quite a pipe-dream.
We hope the above clarifications will meet your expectations and should you need further clarifications you are free to bring it our notice
With best wishes and regards.
Yours sincerely,
Xxxxxxx
October 2017.
(forwarded as received)
December 10 sunday
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