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Monday, January 8, 2018

Praiseworthy Effort By Sri C N VENUGOPALAN For Bankers

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.180104                                                                                                                           04th January, 2018
Shri.  Rajiv Kumar,
Secretary (Financial Services),                                                                                     Regd. Post
Government of India,
Ministry of Finance,
Parliament Street, New Delhi – 110 001

Dear Sir,

At the threshold of 2018, I wish you a Happy and Prosperous and glorious New Year.

I write to you with the specific purpose of apprising you of the imperative need of purging the anomalies in the banking sector permeated as a result of the wicked role played by the Indian Banks’ Association (IBA) in the banking sector.

IBA turns out to be a special purpose vehicle for siphoning the money out of public sector banks (PSBs) managed by Ministry of Finance.  It is collecting subscriptions and contributions in the name of services rendered. If the data on the amounts PSBs paid to IBA for past 10 years is taken, the figure will be alarming.  IBA is not a legal entity as it has no registration under any statute. In terms of section 11 of the Indian Companies Act, it is an illegal organization and MOF placing reliance on it, in any parlance, is undesirable.  The entire assets of IBA are to be confiscated, to be appropriate.

IBA had been acting with extra constitutional powers and was overruling the Legislature of India by thwarting the legislations and subordinate legislations.  For instance, in the case of Bank (Employees’) Pension Regulations, 1995, IBA caused the PSBs revoke the options for pension which were ‘final” and irrevocable in terms of regulation 4(2) by advising banks to permit employees to revoke the options, circumventing the extant regulation put in place with the nod of the Parliament.

While MOF directed IBA to advise member banks to delete the clause providing for forfeiture of service from regulation 22 (4) (b) and to give effect to the amendment vide letter F No.4/8/4/95-IR dated 24.12.1997, the instruction was disregarded and PSBs did not give effect to the amendment by giving options to those who could not opt when the deleted clause was present in the Pension Regulations when they amended the regulations through Bank (Employees’) Pension (Amendment) Regulations, 1998.

Instead of implementing the Bank (Employees’) Pension (Amendment) Regulations, 1998 which is in force even now, IBA caused apex unions/associations in the industry sign a Joint note dated 27.04.2010 containing unlawful conclusions that derogate the Pension Regulations which are statutory and cannot hence be circumvented as Ministry of Finance itself held in letter F No.16/1/58/2008 –IR dated 23.10.2009 after consulting Law Ministry as infra:

“Any administrative order//instruction, which circumvents the provisions of the Regulations is unsustainable. Further, regulations have precedence over the administrative orders / instructions.”

In spite of the above prescription, astonishingly, the Ministry of Finance gave sanction for implementation of the Joint Note vide Letter No.DO.14/1/1/2007-IR dated 10.08.2010 intercepting the relative statutory pension regulations albeit holding on 23.10.2009 that such an administrative order is unsustainable.

The Joint Note contained paradoxical conclusions as follows:

01.  Pension shall become payable to employees retired prior to 27.11.2009 from 27.11.2009 only, irrespective of the date of retirement,  which was in conflict with regulations 52 (1) that mandates payment of pension from the date following the date on which an employee retires.

02.  Employees in service shall pay a contribution to the tune of 2.8 times their pay for November, 2007 and retired employees shall, in addition to refund of CPF paid on retirement pay 56 percent of it to the Pension Fund for opting for pension under it when the Bank is the sole contributor to the Pension Fund as categorically in terms of regulation 5 (3) and 11.

03.  Employees joining banks on or after 01.04.2010 shall not be entitled to pension coverage, which was a statutory guarantee under regulation 3 (4) which stated that the regulations shall apply to all employees who join the services of banks on or after the notified date.

One PSB viz. Union Bank of India came out with a notification in the Gazette dated 06.11.2017 promulgating Union Bank of India (Employees’) Pension (Amendment) Regulations, 2017, after denying pension from date of retirement to 26.11.2009 and raising the contributions aforesaid and excluding employees who joined on or after 01.04.2010 from the ambit of Pension Scheme, with a view to ratifying the wrongs it did on the basis of the Joint Note. This notification establishes that there were no rules till the date of the notification to do such acts and the Bank was guilty of having denied pension and raised the contributions on the basis of the Joint Note. The amendments envisaged in the notifications are prejudicial to the relative regulations and hence cannot be made as rules anytime on account of specific prohibition under section 19.1 and 19.4 of the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970/1980 (“the Act”).

The notification in the name of the Ministry of Finance was strangely singed by the General Manager ( H R ) of the Bank and with a deposition that the Board of Directors of the Bank makes the regulations in exercise of powers conferred by clause (f) of subsection 2 of section 19 of the Act.  The notification was malicious and mischievous as the said clause and section of the Act empowers the Board to make regulations which are not inconsistent with the Act and any Scheme made under it and the notified amendments were inconsistent with the Pension Scheme on grounds stated supra as 1 to 3.

It is to be pertinently noted that an option for pension is remaining due under Pension (Amendment) Regulations, 1998 and the option extended through the Joint Note on unlawful conditions is redundant in the wake of it.  Moreover, the option extended on the basis of the Joint Note is unsustainable as regulation 3 determining the last date of option remains as 26.01.1996 i.e. within 120 days of notification of the principle regulations.  Unless the options taken under the Joint Note are given retrospective effect, which could be done by implementing the  Pension (Amendment) Regulations, 1998, all pension paid on the basis of the Joint Note would become unlawful and a misapplication of the Pension Fund of the Bank.  This can further be underlined since regulation 5 (2) determines the sole purpose of the Pension Fund as payment of pension / family pension in accordance with the regulations and the Pension Fund created under regulation 5 cannot pay pension in accordance with the Joint Note.  

From the point of view of good governance and the proper implementation of the Pension Regulations to regularize matters and for doing away with the accountability aspects in paying pension on the basis of the Joint Note, it is essential that the pension denied from the date of retirement to 26.11.2009 to retired bank employees and the unlawful contributions raised from serving and retired employees on the basis of the Joint Note are released to them. The government that enacts various labour laws to protect the working class withholding the statutorily vested benefits in derogation of the regulations it has put in place in the case of bank employees is ironic. 

The irony becomes significant since pension in banks is paid out of Pension Funds and the payment brings in zero expenditure either to the banks or to the government. Pension Funds are built up of contributions which, banks were previously to make to CPF pursuant to EPF & Miscellaneous Provisions Act, 1952, Pension Scheme being a substitution of CPF Scheme.  Pension Fund is thus the deferred wages of the employees and not the money of the Banks.  The non-payment of the benefit is a palpable injustice since a benefit which has to be paid statutorily, irrespective of whether the banks make a profit or loss, as mandated by section 10 (7) of the Act is deprived.  This is more so  as the Pension Funds, which is the money of the employees held in trust for payment on cessation of employment and salary income, is deprived through unlawful means, when the Pension Funds have annual growth which can contain two to four times the present pension to all the pensioner.  

The injustice involved is discriminatory too as improvement in pension guaranteed by regulation 35 (1) and mandated by regulation 56 of Pension Regulations is also denied in banks, when the Central Civil Pension gets revised with implementation of each Pay Commission regularly and pension in banks remain stagnant in spite of Bipartite Settlements taking place and also in the wake of the OROP sanctioned to the retired defense personnel.

In furtherance of better governance by the Ministry of Finance, I make a request that the various derogations as aforesaid in the implementation of the Bank (Employees’) Pension Regulation, 1995 may please be looked into and  a direction may be given to PSBs for:-

(a)   Implementation of the Bank (Employees’) Pension Regulations, 1998 by giving options under it.
(b)   Repealing the mischievous notification No.428 dated 06.11.2017 which is unsustainable, the amendments being inconsistent with the Act and the Pension Regulations which remain in force, made by Union Bank of India.
(c)   Releasing pension from the date of retirement to 26.11.2009 in accordance with regulation 52 (1).
(d)   Refunding the unlawful contributions raised to the Pension Fund by PSBs in derogation of regulation 5 (3) and 11.

Kindly look into the matter at the earliest, for rectification of the anomalies under intimation to me or inform me in case I am wrong in any of the above statements, in a month.

Thanking You,      

Yours faithfully,


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