Banks face Rs 12k cr pension liability(business-standard)

Anindita Dey / Mumbai January 28, 2009, 0:45 IST

Public sector banks will have to provide for around Rs 12,000 crore to account for pension liabilities, according to rough estimates made by these banks.

The Indian Banks’ Association is currently in talks with representatives of employees on wage revision. The earlier agreement expired on October 31, 2007 and the revised wages will be applicable retrospectively from November 1, 2007.

Banking sources said the gap between the pension liability of PSU banks and the fund available with these banks is Rs 12,000 crore. This has been worked out as per Accounting Standard 15 of the Institute of Chartered Accountants of India which specifies the accounting treatment of retirement benefits to employers.

When AS-15 became operative in 2006, the initial estimate for the additional pension provisioning was estimated at Rs 6,000 crore. However, the latest wage revision may bring in an additional 275,000 bank employees who opted for provident fund earlier. Banks may also provide for the pension liabilities of 65,000 employees who have retired but have been seeking resort to the defined pension scheme since 1996. This second time option will require additional provisioning of Rs 6,000 crore, thus, making the total liability Rs 12,000 crore.

Sources also explained that banks may have to contribute more to the pension scheme now that the interest rate has started coming down and investments out of the scheme may not yield more .

As per the new standard, an organisation will have to calculate the last salary that will be drawn by an employee and provide for pension and gratuity liability on that basis. Prior to this accounting standard, companies usually provided for the pension and gratuity liability on the basis of their current salaries, but the actual payment is made on the basis of the last drawn salaries.

Bankers said if banks have to provide for the pension scheme, this will have to be adjusted against the total increase in the wage bill. However P. H. Ventakachalam, General secretary of the All India Bank Employees Association and Convenor, United Forum of Bank Unions, said this is unacceptable.

He also said that the IBA offer of a 10 per cent annual increase wages is also not acceptable. The current wage bill of PSU banks is around Rs 2,75,000 crore. Technically, the wage increase is calculated on the basis of the total establishment expense of banks. Employees up to the cadre of general managers are covered under this.

IBA is making bank employees fool

Our beloved late Prime Minister, Smt Indira Gandhi nationalized Banks in 1969 considering all pros and cons. She was very much clear in her vision. You can see her success now in the present world scenario when the American and European countries are in the tight grip of recession. It is a matter of surprise that the norms like Basel I, II , risk managements measures are said to be strictly followed by European and American Banks and they are most effected with economic failures in their countries. Now, it is the turn of our Govt. to reward Indian Public Sector bank employees suitably for following the rules and norms issued by the Govt of India, Finance Ministry in toto. There was a period near 1980 to 1986, when a Bank employee was getting salary more than an IAS officer. Now, the politics have changed the Govt.'s views towards bank employees. They are less in numbers. That is why they are unnoticed from political angle. The Bankers are the pillars of a healthy economy.

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.

Bank mgmt, unions likely to agree on 24% salary hike

Mumbai: The ninth bipartite wage negotiation between the Indian Banks’ Association (IBA) and the United Forum of Bank Employees Unions (UFBU) is likely to be finalised with an agreement for a hike between 24-29% for the employees of the public sector banks. The final meeting between the two parties is taking place on January 21 in Mumbai.

IBA, which is representing the government and managements of banks is reported to have agreed raise bank employees’ wage by 24% while on its part, the UFBU, an umbrella organisation of nine bank employees unions has moderated its demand to 29%.

A source, who is aware of the developments, told FE on condition of anonymity, that ‘Now it seems that both the IBA and UFBU, are likely to reach a consensus figure on what should be the gross hike in the salary of the bank employees.

Earlier the UFBU had demanded a hike not below 50% at any cost, keeping in view the 40% hike for the central government employees during the sixth pay commission.

However, the IBA told the UFBU that it was not possible to consider such a large hike as the hike in wages given to the central government employees was once in a decade, whereas for the bank employees, the wage hike was once in every five year..

The forthcoming meeting will be crucial in another aspect involving the second option of pension for those 2,60,000 bank employees that were deprived of the pension benefits when it was offered for the first time by the bank managements during nineties.

While MV Nair, chairman and managing director of state-owned Union Bank of India (UBI) who is heading the IBA panel during ongoing talks, the UFBU body is headed by its general secretary, CH Venkatachalam.

On the second pension option, the IBA has reportedly agreed it in principle for the 2,60,000 bank employees that were deprived of the pension benefits when it was offered by the government in 1995.

However, it comes with a rider that the employees will have to shell out a sum of 15% from their provident fund (PF), apart from the 50% of the usual share, to avail themselves of such facility.

The UFBU was likely to clear its stand on the issue during the ongoing two-day AIBEA conclave, which would be concluding on Sunday evening.

AIBOC demands early settlement of salary revision

The state unit of All India Bank Officers' Confederation (AIBOC) today threatened to organise a mass movement against the Indian Banking Association (IBA) if their six-point charter of demands are not fulfilled by February.

''The salary revision for bank officers' is due from November 2007. Despite the IBA constituted a negotiating commitee for the purpose, very little progress has taken place on the issue. It was needed for the IBA to offer a decent package to the industry immediately'' AIBOC general secretary G D Nadaf told newspersons here.

He further asserted, pension is a social security measure therefore it is an obligation on the part of the management to extend it to all the employees in place of contributory provident fund.

The progress in taking the decision on this demand by the IBA and the government is unsatisfactory.

''We also demand adequate manpower and regulated working hours for bank staffs,'' Mr Nadaf said.

-- (UNI) --