IBA proposes 10% wage hike to bank staff, but no decision yet

IBA proposes 10% wage hike to bank staff, but no decision yet

Newswire18 / Mumbai January 23, 2009, 0:11 IST

Indian Banks’ Association (IBA) has proposed a 10 per cent wage hike to bank employees, a source from the banks’ body said today.

“We have just given an indication. The last wage settlement (hike) was 13.5 per cent, effective from 2002. It all depends on how much banks can take as they will also have to bear the load of pension-related benefits, as and when they are revised,” the source said.

Today, IBA met bank unions to discuss wage revision and pension option for bank employees. “However, the unions did not reject or accept it. There was no concrete decision on the wage hike,” he said. IBA will meet bank unions again early next month. As of March 2007, the total salary bill of all state-owned banks stood at Rs 27,500 crore.

IBA decided that employees’ dearness allowance will be merged with their basic pay, with the base year being Consumer Price Index of September 2006, the source said. The dearness allowance was 25 per cent of basic pay as of September 2006. The discussion on pension scheme was inconclusive.

“With interest rates falling, the gap between the corpus that banks maintain for paying pension to employees and the present value of future payment of pension amount has widened,” the source said. Present value of future payment of pension amount means the current valuation of the ultimate pension liability for a bank, which has to be met at a later date.

Pension scheme of bank employees is a defined payment, which means a bank employee will draw pension as per his salary after retirement without any contribution from him. A private pension scheme is a benefit scheme, wherein the individual contributes a certain sum regularly.

“As it is a defined scheme, the banks have to pay huge amount of pension and that has to be provided. Now, the corpus is Rs 11,000 crore, while they will have to pay Rs 17,000 crore as seen from the net present value calculation,” the source said.