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Sunday, February 4, 2018

Supreme Court Judgement on Pension Issue

Ref:2018/006                                                        Date:04.02.2018

The office Bearers/ Central Committee Members/ State Body Chiefs of AIBRF

     Reg. Enforcement of Regulation 26 of Pension Regulation 1995 by banks
             Verdict of various High Courts and Supreme Court.
     As you  are aware that banks did not enforce Regulation 26 in regard to
     fixation of pension of employees recruited  as Specialist Category officers in
     banks on one plea or the other.

     The effected employees filed writ petitions in different High Courts and Supreme Court. The High Courts gave conflicting judgments and finally matter approached Supreme Court.  The Supreme Court gave judgment in favor of employees by dismissing appeals of managements of various banks but this judgment was   implemented by banks  in favor of  affecte employees only.
     We wrote a letter No. 2017/ 132 dated 28.12.2017 to Under Secretary Govt of India Ministry of Finance stating that   in view of pending litigation  in various High Courts and Judgment of Supreme Court, the Supreme Court Order be made applicable to all pensioners who come within the ambit of Regulation 26 of Pension Regulation 1995 to avoid litigations. Your direction  to IBA will give relief to several affected retirees and simultaneously banks  will also be saved from fruitless litigations.

     This matter is akin to another pension option to leftover retirees which the Govt have to implement in view of several litigations.

     We are happy to inform that acceding to our request, IBA has issued directions to banks vide letter CIR/HR&IR/SKK/2017-18/4439 dated
     01.02.2018  to implement Regulation 26  all cases.
     We attach copy of our letter addressed to Under Secretary and Letter of IBA to all banks for your information
      We are actively pursuing the matter of another option to all compulsory retired employees in view of Supreme Court judgement in S K Kool case and hopefully  IBA may issue instructions to banks soon.

      With Warm Regards                                                             
                                                                          Yours Sincerely,
  Encl as above                                               ( S.C.JAIN)
                                                                GENERAL SECRETARY
Indian Banks' Association
No.ClWl IR&IR/SKKQOI 7-18/4439
February l , 2018
HR Heads of all PSBs
Dear Sir Madam,
Hon'ble Supreme Court Judgement : Civil Appeal No (s) 9371-9374 of (Arising out of SLP O No (s) 5378-5381 of 2015) Regarding Additional Notional Service Under Regulation. 26 of Bank Emplovees Pension Regulations, 1995
As per the provisions of regulation, 26 of Bank Employees' Pension Regula!ions, ! 903. an employee shall be eligible to add to his service qualifying for superannuation pension (bli{ not for any other class of pension) the actual period not exceeding one fourth of the ;enuth of his service or the actual period by which his age at the time of recruitment exceeded the upper age limit specified by the Bank for direct recruitment or a period of five years whichever is less, if the service or post to which the employee is appointed is one .-
(a) for which post-graduate research, or specialist qualification or experience in scientific . technological or professional fields, is essential, and
(b) to which candidates of age exceeding the upper age limit specified for direct  are normally recruited;
(c) for which the candidate was given age relaxation over and above the maximt!ln age  fixed by the Bank on account of his possessing higher qualifications or experience:
Provided that this concession shall not be admissible to an employee unless his actual qualifying service at the time he quits the serv'ice in the Bank is not less than ten vears.

Provided further that this concession shall be admissible if the recruitment rules in respect of the said service or post contain specific provision that the service or post is one which carries benefit of this regulation.
Provided also that the recruitment rules in respect of any service or post which carries the benefit of this regulation shall be made with the approval of the Central Government.
2. In this connection, queries were raised by various banks to the Ministry of Finance as to whether the benefits of Regulation 26 ibid can be allowed to the existing employees who may fulfil the conditions laid down in this Regulation although there was no specifie provision in the recruitment rules with regard to this benefit. 

World Trade Centre Complex, Centre 1, 6th Floor, cuffe Parade, Mumbai • 400 005. • Tel. +91-22 2217 4040 • +91 22 2218 4222 / 2215 4131 website' association
3. On e.xatnining the tnatter, the Ministry of Finance. vide its letter F.NO. 4/8/16/98-IR dated the 14 th October, 1998. addressed to the Chief Executives of all the Public Sector Banks (except SBI). claritied that Regulation 26 or the Pension Regulations enable the banks to franle recruittnent rules in respect of any service or post for which post graduate research or specialist qualification or experience in scientific, technological or professional fields is essential and to which candidates of age exceeding the upper age limit specified for direct recruiunent are norrnally recruited and envisages making of a provision in the Recruitment Rules that such person shall be adrnissible för addition to qualif)ing service at the time of retirement on superannuation as per provisions contained in the Regulations ibid. The regulation further provides that such recruitment rules have to be framed with the approval of the Central Government. However. till date no bank has approached the Central Government f'or approval of such rules. As such. the benefit of addition to qualifying service in terms of Regulation 26 of the Pension Regulations shall be applicable only to those candidates who have been/would be recruited in accordance with the recruitment rules framed by the banks with the approval of the Central Government and that such benefit does not extend to e.xisting Officers recruited under old Scheme/procedure.
4. Public Sector Banks having been advised as above by the Ministry of Finance were  accordingly disposing off requests made/being made by the Employees for giving the benefit of Regulation, 26.
5 In the absence of Recruitment Rules duly approved by the Central Government. the  enlployees who were otherwise fulfilling the other conditions stipulated in Regulation 26. for said benefit, were denied such benefit.
6. Aggrieved with such denial, Shri V Vijayan and others filed a Writ Petition before Hon 'ble Madras High Court against Bank of Baroda. Silüilar Writ Petition was filed by Shri Anand Pal Saxena & others before Hon'ble Allahabad I-ligh Court, against Allahabad Bank
The Hon'ble Madras High Court delivered the judgement in favour of Bank of Baroda whe:eas Hon' ble Allahabad High Court gave its judgement in favour of Shri Anand Pal Saxena & others.
7. Slui V. Vijayan & others filed Civil Appeal before Hon'ble Supreme Court against the jildgement of Hon'ble Madras High Court, Ailahaoad Bank also filed u Civil Appeal before Hon' bie Supreme Court against the judgement of Hon'ble Allahabad High Court. Both the Civil Appeals were clubbed by Hon' ble Supreme Court for hearing.
8. After hearing the arguments of the parties the Ilon'ble Supreme Court found that once the regulation was framed and the same was acted upon, the plea of absence of prior approval cannot be pressed into service by the Bank as the Bank itself has not moved for such prior approval. The Hon'ble Supreme Court vide its order dated the 20th July, 2()17 allowed the civil Appeal filed by Shri V Vijayan & others in the matter of Bank of Baroda and also

Banks' Association

dismissed the appeal filed by Allahabad Bank in the matter of Shri Anand Pal Saxena . (copy of Ho*ble Supreme Court, Judgement enclosed)
9. Affected ex-employees of Public Sector Banks are representing to respective banks to give the benefit of Regulation 26 of Bank Ernployees' Pension Regulations 1995 to them quoting the above Inentioned judgement of Hon'ble Supreme Court. IBA is therefore. receiving references from various PSBs seeking our advices as to whether the benefits as available under Pension Regulation. 26 can be given to the affected ex-employees in the light of said judgement of Hon 'ble Supreme Court.
10. The matter was put up to the Managing Committee of IBA in its meeting held on 29-122017. The Committee after deliberation advised to obtain a legal opinion on the applicability of Supreme Court Judgement as to whether it is applicable to all banks uniformly and thereafter advise the member banks accordingly.
I l . We have obtained the legal opinion of Shri S D Kelkar, Senior Partner, Kelkars & Associates whose services have also been engaged on Retainership basis at IBA. The  opinion given by him is as under :
"In the light of the reasons appearing in last but one paragraph or the Hon' SC order dated 20th July, 2017 we are of the considered view that the benefit of additional notional service will have to be gtven to all those employees who fall within the ambit of clauses (a) and (b) of the Regulation 26 of the Pension Regulations, 1995. The judgment would apply to all banks having a regulation which is in pari materia or  sinflar to Regulation 26 considered by the Hon 'ble SC, in their Pension Regulations.
We also understand that the review petitions filed by Bank of Baroda and Allahabad Bank against the judgment dated 2N July, 2017 have been dismissed and as such the judgment has become final and binding. "
12. In view of foregoing opinion and also as approved by the Managing Committee of IBA in its meeting held on 29.12.2017, the Judgement of Hon'ble Supreme Court (copy enclosed) may be implemented in all Public Sector Banks (except State Bank of India), as Regulation. 26 of Bank Employees Pension Regulations, 1995 is uniformly applicable to all Public Sector Banks
Yours faithfully,


Phone:  22629486(Bank); 22629509(U.O.); Fax: 22642785(Bank); 9819375526(M)
     GS / 3/105/18                                                                        3rd February 2018
All Office Bearers and Units,

Dear Comrades,

Bank’s  Q3 Financial  Results – Our Observations..

Today Bank’s Board has adopted the audited Q3 Financial Results and has published the same. The business figures for last 3 quarters are as under:

Items June 2017 Sept 2017 Dec 2017
Deposits 375796 386025 398518
Advances 295175 309953 314475
CASA 133412 129588 135537
Gross Profit 2057 3996 5650
Net Profit 117 (1414) (2664)
RAM 55.4% 54.1% 55%
Provisions 1940 5410 8514
For NPA Provisions 1876 5341 7861

We have analyzed the results from the available data. Our Observations are as under:

1) Deposits as well as advances are registering growth sequentially in last 3 quarters. While deposit is growing at annualized rate of 4.9% the advances grew by 13.5%. Such growth rate is better compare to average growth of all SCBs for the corresponding period. So our Bank is growing in terms of Business with advances growing at higher rate.

2) Bank’s CASA deposits that have fallen to 129588 cr from 133412 Cr in June 2017 have shown improved growth in Dec 2017. Average CASA is at 34% in the 3rd quarter. This area requires improvement  to be at par with other competitors.

3) Although the gross profit has gone up from 2057 cr in June 2017 to 5650 cr is December 2017 the Gross profit for individual quarter is coming down as GP for june that was at 2057 cr cam down in Sept quarter to  1939 Cr and for December quarter at 1554 cr. Reasons for such trend needs to be analyzed and steps need to be taken up by the Bank.

4) Net loss as at December 2017 is 2664 Cr . This is mainly due to provisions on NPA for 7861 cr out of which 2557 cr pertains to 29 NCLT accounts and 440 cr is for depreciation on Investments. The provision on NCLT accounts is made upfront.

5) The slippages in NPA accounts for December quarter was 4187 cr that has gone  up from 2686 cr in September but less than 4453 cr in June 2017. Thus there is need for improving the Asset Quality.  Net NPA ratio for Dec 2017 is at 6.96% that has gone up from 6.70%. But the Provision Coverage Ratio has improved to 57.12% from 56.06 % art September 2017.

6) The Net Interest Income has sequentially increased in 9 months from 2243 cr in June to 2321 cr in Sept and to 2548 cr in Dec 2017. Whether such increase is matching with the growth in business and by capturing the increase in slippages has to be analyzed. However the NIM has improved to 2.23 in December quarter from 2.08 in September 2017 mainly due to reduction in cost of funds by 0.27% .

7) But the Non Interest Income is gradually coming down from 1414 cr in June to 1217 cr in September to 873 cr in December. The reason for such trend needs to be analyzed and Bank has to initiate steps to improve the performance.

8) Although the reductions in NPA through recoveries, upgradation and write off is showing improvements in every quarter the same can be improved further. For this some concerted efforts are required.

9) Capital adequacy Ratio is comfortably placed with recent QIP etc.

10) RBI’s risk Based Supervision report has identified divergence of Rs 1835 cr in Net NPA and Rs 555 cr in provisioning in March 2017.

The results indicate that Bank has  decided to
 1) clean up its books by making up front provision on all 29 NCLT accounts  &
2) Make more provisions towards other NPAs to maintain PCR at a reasonably sound level. This is expected to create confidence among Bank’s investors and boost its market valuations. Looking to the business level & its growth, revenue generations and the future trend we are sure that the Bank is on sound footing and there is no need to worry. But Bank needs to be more professionalized in dealing with its business models and in maintaining the asset quality & recovery. The developments with regard to interest rate on Government Securities and the drop in yield have resulted in Depreciation on Investments. Similarly the IBC code despite all the promises from the Government could not bring any resolutions to the NCLT accounts so that the provision can be reversed. It appears that the resolutions will take longer time and even if comes it may not bring in recovery as can be seen from the developments on this front. But there is a possibility of new accounts getting identified and may be referred to NCLT attracting additional provisions. So despite the Bank growing in business and consistently improving its Gross Profit the net profit will always be a question unless the recovery in NPA accounts is ensured.   For this the role of the government is vital and till such time the trend of “make more profits and provide more for Bad Loans” will continue.  However there are certain grey areas that will be raised by us in the EIP Monitoring committee meeting that will be held shortly.

When we meet in our conference in Bengaluru we shall deliberate on the health of the Bank and decide suitable actions to pursue in the days to come to protect the Bank.

Please explain the results and our stand to employees and  prepare them for future action.

With warm regards,

Yours Comradely,

   (N. Shankar)
  General secretary

                March on to 10th conference at Bangalore! Make it a grand Success.

“Capture AIUBEA’s Vision of Union Bank’s Glorious Tomorrow.”

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