Is thoughtless introduction making pension system lose its credibility?
Sporadic launching of popular social security schemes has become a fashion for governments. The recently launched Atal Pension Yojana, will definitely provide some work and funds to the administrators of NPS and but may not to the subscribers
Eventually India has to debate the rationale for back-door introduction of National Pension System (NPS), denying an existing benefit to future employees of select organisations. None of the reasons put forth is convincing. The defined benefit pension scheme is retained for legislators, defence employees and all those who were in service prior to January 2004 and were enjoying the benefits of defined benefit pension schemes. The theory of increasing financial burden does not stand reason in such a situation.
Sporadic launching of popular social security schemes has become a fashion for governments. Atal Pension Yojana is one such scheme, latest arrival in the family of social security schemes. The scheme will definitely provide some work and funds to the administrators of NPS. Further benefits need to be debated. If authorities are genuinely interested in providing social security, efforts to harmonise the working of Employees Provident Fund Organisation (EPFO) and Pension Fund Regulatory and Development Authority (PFRDA) is essential. 
For workers in the organised sector, the responsibility of ensuring adequate post-retirement care should fall on the employer, and the savings and funding, by whatever vehicle, should happen during the active service of the individual employee. Unfortunately, NPS does not factor in the adequacy of savings or the safety of funds generated or the guaranteed periodic payment of the amount saved in a systematic way to meet the post-job financial needs of the beneficiary.
Defined-benefit pension scheme should be restored in organisations, which should be guided to create pension funds based on actuarial studies. The thoughtless introduction of NPS has made pension system lose its credibility. The Indian government should at this late hour revisit the whole issue instead of making ‘popular’ announcements about social security. Finally, the bill for providing social security will be back at the doors of the tax-payer. There will be some relief, if the employees demand and get wages with built-in retirement benefit component and employers and employees together accept the responsibility of providing a post-retirement life to the employees commensurate with the life they lived while in service.
A public debate on the private intentions of the introduction of the now rechristened National Pension System is overdue. Structural changes in the pension and retirement benefit schemes should have been a necessary component of economic reforms in India introduced during the early 1990s. This did not happen in the natural way and as a result, dismantling of the existing schemes under this category happened in a crude and cruel manner and NPS, which got its entry through the back-door, remained orphaned for almost a decade.
Though New Pension Scheme was introduced through an executive order (read ‘without legislative mandate’) in 2004, the PFRDA Bill, 2011 was passed by Rajya Sabha only on 6 September 2013. The bill had been passed in the Lok Sabha on the previous day. The PFRDA, which has been functioning under executive authority, since it was set up in 2003, got a legitimacy of sorts, after almost a decade.
The Defined Contribution-based New Pension Scheme (NPS) has replaced the Defined Benefit-based Pension Scheme and has been made compulsory for central government staff (excluding defence personnel, in the first stage) joining service from 1 January 2004. A slightly different version of NPS, somewhat similar to retirement benefit schemes offered by Mutual Funds has also been thrown open for subscription to the public. This article takes a view of NPS for central government employees and being gradually introduced by public sector organisations including banks.
Before the introduction of the New Pension Scheme following the budget announcement of 2003-2004, the major pension/retirement benefit schemes in operation were:
• Government Pension Scheme (Defined Benefit) administered by central and state governments, financed through budgetary provisions.
• General Provident Fund out of employees’ contributions. Open to government employees.
• Employees Provident Fund Scheme for employees in firms with 20 or more employees and Employees’ Pension Scheme, both envisaging contributions by employee and employer.
• Public Provident Fund maintained with State Bank of India, select Post Offices and other designated banks. Open to all individuals.
• Annuity schemes marketed by insurance companies including LIC.
The Central government employees who were in service as on 31 December 2003 have a Defined Benefit Pension Scheme. According to a 2008 estimate, the net present value of the pension liabilities of central government now being met on a Pay As You Go basis was Rs3,35,628 crore (6th Pay Commission Report, 2008). Considering this staggering liability which grows proportionately with rise in inflation rate and periodical revision in pay structure, Central Budget, 2003-04 contained a proposal to introduce the new restructured defined contribution pension system for new entrants to central government service. The New Pension Scheme (NPS) for new entrants to central government service from 1 January 2004, except to Armed Forces, in the first stage, replacing the existing system of defined benefit pension system was introduced through a notification dated 22 December 2003.
For those who get unduly perturbed by the pension liability of government, a word of solace comes from the following media report (2014) about Pension System in the United States:
“Using a more conservative method of accounting for financial gains in the marketplace, there is a $4.1 trillion gap between assets and liabilities — known as the ‘unfunded liability’ — of all state-level pension systems in the United States, according to State Budget Solutions, a fiscally conservative think tank that deals with tax and spending issues at the state level.”
This figure has further gone up in recent months and, remember, the permissible and actual aggregate public debt owed by the United States, in March 2015 stood at a little over US$18 trillion ‘only’.
The central government employees covered by the NPS are two-way losers. One, the huge costs savings for the government in pension pay out by the switch over to the defined contribution pension system from the defined benefit pension system is a direct charge on the overall remuneration package this category of employees are entitled to. Two, they do not have a window to air their grievances in this respect because the loss is not immediately felt and the full impact of the change will be felt only after 30 years or so when those who joined the service in January 2004 start retiring. It is also true that the anticipated savings in pension expenditure will also start accruing to government only by then.
A time tested social security arrangement available to a section of employees has thus disappeared without any alternative system in place. When one refers to social security arrangement, one has in mind all pension-related benefits including family pension. While in the private sector and profit making public sector undertakings employees, have an opportunity to bargain and settle remuneration based on their skill and market realities, government employees and those employed in quasi-government and statutory bodies are a helpless lot, whose bargaining power is stifled in the name of public interest. It is in this context that they deserve a special treatment at least in respect of social security arrangements like pension-related benefits.
The conscious exclusion of the category of employees covered by the NPS from the Sixth Pay Commission’s purview while referring pension-related benefits for the Commission’s review made it unnecessary for the Commission to even examine the impact of the change in the pension eligibility in the overall  remuneration package of this category of employees. It is another matter that because the introduction of NPS was at a time the Indian Equities Market was performing fairly well, there was a general feeling that pension funds are going to bring attractive returns.
Till 2009, there was no thought in the minds of authorities about the arrangements for payment of compensation/Family Pension to the survivors of central government employees who joined  service on or after 1 January 2004 and died in harness. When several such cases came up, as an afterthought, in 2009, Centre made some interim arrangements in this regard and decided to make provisional payment of Family Pension to such survivors under Rule 54 of the Central Civil Services (Pension) Rules, 1972. Such payments were subject to an undertaking to be furnished by the pensioner ‘to refund or adjust the provisional payments……out of the final entitlements as sanctioned by the Government at a future date.’ Such uncertainty and imposition of future liability is unheard of in the case of pension payment.
The stated objective of reducing the huge burden from Defined Benefit Pension Scheme by introduction of Defined Contribution Pension Scheme is not convincing as the financial burden is unlikely to come down at least for the next two decades.
It will be imperative for government to address issues like family pension, reasonable return on pension funds and review the adequacy of the present 10% contribution from government and employees to ensure a post retirement lifestyle commensurate with that the employees are used to, during their active service. It does not require much calculation to observe that in the existing form, the NPS will land the employees covered under the scheme, by the time they retire, in a very disadvantageous position compared to their predecessors who enjoy Defined Benefit Pension Scheme, as Government’s own estimates show a much larger outgo than the ten per cent contribution envisaged under NPS, for meeting the pension-related liabilities under the previous scheme.
From the employees’ side, a conscious effort to understand the scenario and factor in these concerns in their savings habits and also in future bargains of salary structure will be necessary.
All these point to the need for an overhaul of NPS to make it a really useful instrument for retirement planning. Otherwise, next generation will brand it a parasite which killed existing social security systems in India.

Facing the future

The 2003 New Pension Scheme was imposed on the ‘future’ employees of the government and other organisations which had well-designed Defined Benefit Pension Schemes and later offered to the public with paltry government subsidy for external considerations and pressure from certain vested interests. Long after, in 2006-07, though for totally different reasons, ING Group and Indian Institute of Management, Bangalore undertook a joint research on pension systems in India at the instance of ING Global Retirement Services. The findings are available in the form of a 588-page book “Facing the Future: Indian Pension Systems”(By David JW Hatton, Naren N Joshi, Fang Li, R Vaidyanathan, S  Jyothilakshmi, Shubhabrata Das and Sankarshan Basu. Publisher: Tata McGraw Hill Rs625). One wishes that the Government of India and PFRDA revisits the analysis contained in this book which has gone into the evolution of new pension systems in several countries in the world and the relevance of those experiences in the Indian context.
Facing the Future claims to “analyse the results of extensive market surveys, draws from the experience of industry experts and studies the different pension systems around the world. The book encourages thinking on the pension issues which will lead to a viable solution to India’s problems.
Twelve years after the introduction of NPS, these observations may look a little unconvincing or odd. But the lingering feeling that a well-established social security system is being discontinued without any reasonable substitution makes one flag the incompetence of the NPS in its present form. It is pathetic that there is no evidence to show that PFRDA has taken note of the findings recorded in the book under reference for which its then Chairman Dhirendra Swarup had written a Foreword in 2007!
(MG Warrier is former general manager, RBI, Mumbai and author of the 2014 book “Banking, Reforms & Corruption: Development Issues in 21st Century India”)
Dharmik Bhatt
8 years ago
I am of opinion that all categories of office bearer and officials.including MPs, MLAs, Ministers, government employees, corporate office bearers, Farm workers, Industrial workers,Unorganized sector day today workers and all left overs may be covered under only one unified scheme of social security. Why MPs and MLAs are given life time pension with immediate effect for serving the nation for one day in their entire life span? This is totally ridiculous and exposing non social and criminal face of our legislatures.
MG Warrier
8 years ago
Those who are the 'victims' of NPS, do read the comments posted by Nirmal and Satheesh. Moneylife first published my article on NPS some years back and has supported me in creating some awareness among readers about the negatives (there are only negatives!) of NPS. My arguments all along get strengthened by Chapter 10.3 of the Seventh Central Pay Commission Report. GOI did not include NPS in the TOR for VII CPC, but the flood of representations and media report made CPC to have a look at NPS.
8 years ago
Many thanks for this brilliantly written article which throws light on vital issues adversely affecting the Government employees covered under NPS.

There is much retirement-related inequality existing between the Government employees covered under NPS and those in service before 1st January, 2004. The employees covered under NPS do not have the basic social security schemes such as PF, gratuity etc. which are even available to the employees in the private sector! Moreover, the pension payable under NPS after retirement is not expected to be linked to Dearness Allowance (DA). It is clear that the Government employees covered under NPS have a number of disadvantages when compared to other Government employees under the old pension system. However, the new entrants in Government service do not foresee the difficulties which will be experienced when they really get into their retirement life after a service of 30 years or so. It seems the trade unions consisting of predominantly the other class of employees (who are not covered under NPS) do not sincerely attempt to raise the grievance of those covered under NPS. The 7th pay commission also did not pay attention to the problems of employees covered under NPS. Instead, it has simply provided a direction to form another committtee to study the NPS related issues!

It cannot be argued that the sudden introduction of NPS for a class of Central Government employees was "thoughtless". Isn't it obvious that the political leaders had taken care to safeguard their own interests because "legislators" were excluded along with the defence personnel from the very beginning of NPS? :) It also proves that they knew pretty well what they were doing because they carefully protected themselves from the uncertainty and drawbacks of NPS.

Sooner or later, the Government employees including officers in the Civil Services joined after 1st January 2004 will realize the difficult situation they are in. They will sense that they are the victims of a really bad decision affecting the quality of their families' life after retirement. Then they will have to protest and take the necessary action to get the NPS scrapped. After all, they do the same work as the other class of employees who are not covered under NPS do. So why should they be treated differently? It will be demoralizing for them to be treated like second-class employees.

In fact, the introduction of NPS will not reduce the financial burden of the Government at least for the next 20 years. It only increases the current burden. These are the times the Central Government is selling off the shares of public sector companies for very less prices even when the stock market is down! Instead of meeting fiscal deficit with such drastic measures and illogical actions which are so ridiculous, the Government can plan to utilize the accumulated corpus of NPS after scrapping NPS for Central Government employees. The future savings of 10% of basic pay going to into the NPS will also prove to be a relief for the Government at least for the next few years. India is one of the few countries in the world today which is expected to grow well into the future and our economy is vibrant. The need of the hour is to ensure economic growth and development for the years to come. Growth can be ensured only if adequate investment is done in a timely manner in sectors such as the Railways which are crucial for the economic development of India. The country is going to become at least the second or third biggest economies in the world in the next 15 to 20 years. After all, it is irrational to assume that the payment of pension to Government employees will be a burden to a wealthy and developed nation. Now it may be considered a burden for the Government to pay pension but the case will be totally different after 15 or 20 years if we consider the growth prospects of our economy.

Recently there were some reports saying that the Government is considering the proposal to provide gratuity to its employees covered under NPS. The other class of Central Government employees and even the private sector employees do have access to this social security scheme. This is a welcome step in the right direction which is absolutely essential indeed towards maintaining equality. It shows that the present Government is committed to take the correct and reasonable measures to ensure equality among Government employees. The next welcome move will be the action to scrap the NPS for Central Government employees. The initiatives such as removing the uncertainties prevailing over the welfare of Central Government employees will demonstrate that the present Government at the centre promotes employee welfare. Good governance will ensure a motivated workforce and the collective action of the fully inspired and committed Government employees will be a very important factor in the progress of the nation.

The All-Citizens model of NPS enables anyone to receive pension after the age of 60 years. There are popular schemes like the Atal Pension Yojana being announced by the Central Government from time to time. So, the infrastructure set up for NPS will not be wasted even if the Government scraps the NPS for Government employees.

I tend to think that the sooner the NPS is scrapped for the Central Government employees, the better for the employees and the whole nation!

Replied to Nirmal comment 8 years ago
Many thanks for the views and perspectives expressed on the demerits of NPS for central govt employees! Well, if the NPS is scrapped for the central govt employees, the 10% contribution corpus from the employees side in NPS can be routed to the PF(Provident Fund). Currently the central govt employees covered under NPS do not have PF. This issue can also be resolved if NPS is scrapped for central govt employees.
MG Warrier
8 years ago
With reference to my observation on APY, there were some queries.My own calculation of 'present worth' in a couple of situations given below:
Present worth:
If my age is 25 today, the present worth of Rs 1000 I will be getting when I am 60 @6 per cent inflation(assumed) would be less than Rs125
If my age is 35 today, the present worth of Rs1000 I will be getting when I am 60 at an assumed rate of inflation of 6 per cent would be around Rs250.
The Rs5000 monthly pension being talked about in advertisements under Atal Pension Yojana a subscriber joining at the age of 25 today will be getting when he is 60 years of age will be worth less than today’s Rs625/- at an assumed rate of 6 per cent inflation.
8 years ago
It was a brilliant article. I sincerely hope a lot of people read this article, especially the officials concerned with pension policy making in MOF. I am a civil servant who joined the service in 2006. NPS has been forcibly thrust upon new recruits without any option or alternative.

Further more the accumulations and the returns generated are not very encouraging. I dont understand how the NDA govt, in one stroke , undid the social security provision for Govt employees.
I was told OASIS report was the basis for such a decision. One does not know how relevant are the claims and projections of the report today.

Many are yet to realize the implications of the Defined Contributory Pension system.

I request you to apprise Ministry of Finance of the implications of the NPS,
The political executives have not cared about it. Nor the bureaucrats who took the decision

My interaction with MOF and PFRDA officials shows that very few are concerned about the implications of NPS as most of them are not under NPS..

If only the PM, FM could listen to your sagely counsel, they would scrap the NPS and restore the earlier Defined Pension scheme to Government servants.

S. Murali Krishnan [email protected])
MG Warrier
Replied to MURALI KRISHNAN comment 8 years ago
Thank you Murali Krishnan. You must thank Moneylife which is the lone fighter among print and electronic media publications, which gives us space even to debate such issues!
MG Warrier
8 years ago
I am happy that about 3000 moneylife readers have perused this article. There are only 7 comments including mine! The inadequacies in the formulation, implementation and outreach of Pension Systems in India are real. The government which has to be ultimately responsible for the social security content of the Pension Systems seems to be dodging the real issues. Majority of the present and future beneficiaries of pension systems are not taking interest in understanding the pension products which they are either forced to ‘buy’ or voluntarily opt for. Amitabh Bachan is coming on Television and canvassing for Atal Pension Yojana. We are told small recurring savings under the scheme, for those who are in the age group of 18 to 40 now will fetch a monthly pension of Rs FIVE THOUSAND when they would be sixty years of age. Will some MONEYLIFER tell me the present worth of Rs5000 individuals of ages 18, 25, 30 and 40 will be receiving when they would be 60 at an assumed rate of six percent inflation?
[email protected]
MG Warrier
8 years ago
I am happy that about 3000 moneylife readers have perused this article. There are only 7 comments including mine! The inadequacies in the formulation, implementation and outreach of Pension Systems in India are real. The government which has to be ultimately responsible for the social security content of the Pension Systems seems to be dodging the real issues. Majority of the present and future beneficiaries of pension systems are not taking interest in understanding the pension products which they are either forced to ‘buy’ or voluntarily opt for. Amitabh Bachan is coming on Television and canvassing for Atal Pension Yojana. We are told small recurring savings under the scheme, for those who are in the age group of 18 to 40 now will fetch a monthly pension of Rs FIVE THOUSAND when they would be sixty years of age. Will some MONEYLIFER tell me the present worth of Rs5000 individuals of ages 18, 25, 30 and 40 will be receiving when they would be 60 at an assumed rate of six percent inflation?
[email protected]
9 years ago
there is no mentality of GIVING in our COUNTRY , what u call PENSION is an Eyewash.It is a simple SB/recurring deposits with added SUM OF INTEREST+BONUS paid at the end of a particular tenor in equated installments Annuity purchased from this sum of and paid in installments. after all it's u r MONEY only.
Dharmik Bhatt
9 years ago
This is the real face of our central and state level legislators. This exposes their mental level and selfishness associated and included in their thought process for serving the nation.There is no social or economic or financial reason for giving them life time defined pension with out any contribution for serving the nation for five years only. Why other citizens of the country should get peanut pension after paying contribution for life time from their earnings?This is a clear cut inference that common men can not get justice in our country.
9 years ago
Good points raised
I would like to connect with Mr warrier
Email id or mobile ,either will do

MG Warrier
Replied to S.S.A.Zaidi comment 9 years ago
Mail ID [email protected] and Mobile +919349319479
Thanks for the interest shown.
Changes come when more people think and talk about the need for change. Moneylife is a real active change agent.
9 years ago
EPFO iteself is a fraud fund.
The UNO(universal account number) lanuched in 2014 Augest is also useless

if Mr. XYZ worked in Infosys for year 2011 to 2013.
later worked in wipro for years 2013 to 2015.
and later worked in tcs from 2015 to till date,

in this case, he registers for UAN, then he will not find "infosys" epf account. (because UAN is a new complication launched in 2014)

He will have to keep running behind EPFO offices for more than 3 years, by then
EPFO will stop crediting interest in 2016(in this example) and puts as "inoperative account".
Later in 2018, Finance Minister gives a speech in budget, telling that "inoperative accounts funds will be diverted to
pension for sr. citizens".

Hence EPFO is not "retirement savings" but a "hidden tax".
9 years ago
Mr. Warrier please share your thoughts with Mr. Ramachandran as how to get justice from Public Sector Management represented by IBA and Unions who have colluded to deprive retired bankers of their legitimate pension rights.

S. Ramachandran Kunal Icon, Building -A8
Former General Manager, Bank of Baroda, Flat No. 104, Pimple Saudagar,
Former Chairman & CEO, The Sangli Bank Ltd. Aundh Camp, Pune – 411027,
(Now merged with ICICI Bank Ltd) Tel: 020 27201012.
Former Administrator, Madhavapura Mercantile E-mail id: [email protected]
9 years ago
Shri Hasmukh Adhia,
Secretary, Departmental of Financial Services,
Ministry of Finance, Jeevan Deep Building,
3rd Floor, 10, Parliament Street,
New Delhi -100001.



This is in reference to the Record note of discussion between Indian Bank’s Association and United Forum of Bank Union on the issue and demands relating to retirees of Bank’s held on 25th May, 2015 at Mumbai. On the face of it, it is quite evident that the record note has been prepared as an afterthought only with a view to show that the UFBU has taken up the issues of retirees with all seriousness. However, the record note reveals very distinctly the cover up operation and the nexus between the two parties in belying the long standing demands of retirees. I have furnished hereunder my considered views on various averments of the record note:

IBA maintained that any demands of retirees can be examined only as a welfare measure as contractual relationship does not exist between banks and retirees. The periodic wage revision exercise based on mandate from member banks cover only wages and service conditions of serving employees. Retirement benefits are based on service conditions prevailing at the time of retirement of an employee and these do not change with settlement.
At the outset, it is unfortunate that the Bankers who are represented in the Personnel committee of IBA are making such prefatorial statements in the Joint Note 2 without understanding its implications and without questioning the wisdom of officials of IBA who have framed these opening remarks. Worse still is the uncontested manner in which the UFBU “leadership” has accepted these prefatorial remarks without even recording their views on it. Besides indicating their bankruptcy of mind, it also shows degree of collusion between the parties to the joint note 2. Now I proceed to give my detailed observations as under:

1. I strongly object to the usage of the word “Welfare measure” for Pension and Pension related issue. The world over, Pension and its related issues are considered as “Social security measure” and not as a “Welfare measure” which has the connotation of giving some benefits out of gratis, charities or a public aid. We the pensioners are not beggars to seek alms from IBA. Please visit any site on Pension including the PFRDA and Government of India site, or read any judgment of Supreme court, you will see that Pension is considered a social security measure and not as a welfare measure and when you consider it as a social security measure, it encompass the whole “life” and not restricted to the age of retirement. They are also called as retirement benefits and superannuation benefits and encompasses provident fund, gratuity and pension scheme. Pension Scheme in particular is in the form of guaranteed life annuity thus insuring against the risk of longevity and inflation.

2. We may in this connection point out that the antiquated notion of pension being a bounty a gratuitous payment depending upon the sweet will or grace of the employer not claimable as a right and, therefore, no right to pension can be enforced through Court has been swept under the carpet by the decision of the Constitution Bench in Deoki Nandan Prasad v. State of Bihar & Ors. (1) where-in the Supreme Court authoritatively ruled that pension is a right and the payment of it does not depend upon the discretion of the Government but is governed by the rules and a Government servant coming within those rules is entitled to claim pension.

3. Summing up the judgment in the case of S.P.Gupta Vs Union of India, the Supreme court stated that :

“ it can be said with confidence that pension is not only compensation for loyal service rendered in the past, but pension also has a broader significance, in that it is a measure of socio-economic justice which inheres economic security in the fall of life when physical and mental prowess is ebbing corresponding to aging process and therefore, one is required to fall back on savings. One such saving in kind is when you gave your best in the hey-day of life to your employer, in days of invalidity, economic security by way of periodical payment is assured. The term has been judicially defined as a stated allowance or stipend made in consideration of past service or a surrender of rights or emoluments to one retired from service. Thus the pension payable to a Government employee is earned by rendering long and efficient service and therefore can be said to be a deferred portion of the compensation for service rendered. In one sentence one can say that the most practical raison d'etre for pension is the inability to provide for oneself due to old age. One may live and avoid unemployment but not senility and penury if there is nothing to fall back upon.

4. Further, in the case of M.R.Prabhakar & Ors. vs Canara Bank & Ors. on 3 October, 2012 ( (2012) 9 SCC 971), it has been clearly enunciated that voluntary retirement maintains the relationship for the purposes of grant of retiral benefits, in view of the past service. On account of maintaining the relationship for the purposes of retiral benefits, second option to retirees was given. Moreover, in the relationship is between the banks and retirees, the IBA and constituents’ of UFBU are privy to the relationship between the parties and they have no locus standi to say that there is no contractual relationship between banks and retirees. On account of such contractual relationship, monthly pension is being paid to retirees. Retirees demands are not welfare measures, they are made as per the existing regulations. Payment of pension is not welfare measure, it is for the past work done to the organization/country. In Nakara case, it has been held that Pension is their statutory, inalienable, equally enforceable right and it has been earned by the sweat of their brow. As such it should be fixed, revised and modified and changed in ways not entirely dissimilar to the salaries granted to serving employees. ( 1983 LLI 0101 SC )

5. Therefore to term the Pension and pension related issues as “ welfare measure” is not out of ignorance of IBA but a deliberate attempt to mislead the retiree which has been accepted by our great netas willingly.

6. Now on the statement of IBA that contractual relationship does not exist between banks and retirees, I have to state that it is a well established fact on account of various judicial pronouncement that Pension is only a deferred portion of the compensation for service rendered. Bankers have worked hard beyond normal working hours which fact cannot be denied as the Association leaders have been demanding for fixed working hours or alternatively compensation. The demand for holiday on Saturday is a culmination of this demand. Thus, bankers have toiled hard, given their brain, brawn and blood during their hey-days and hence pension is only a compensation for their loyal service. Therefore, the contractual relations extend beyond the date of retirement. It is for the reason that Pension is a deferred compensation that DA component is added to it and adjusted every quarter/half yearly.

7. If there is no contractual relationship with the retirees, why is that the Government of India is considering “one rank, one pension” issue of thousands of Armed Forces personnel? Is it not that there is periodic updation of Pension of Government servants? Is it not that Pension Adalat are functioning at various centres to resolve the issues of retirees? Is it that Government of India is ill-advised by a battery of legal luminaries to consider pension related issues of pensioners? In fact, IBA way back in March 2009 had issued a circular to all the Public Sector Banks, based on Government of India directive to establish a grievance cell to address the grievances of retirees. A Further, in the same circular, PSBs were advised to holding discussions with representatives of the Association of Retired Employees periodically say once in a half year so that grievances can be settled across the table. All the above acts of the government clearly and categorically lead us to only one thing that the Government in its wisdom has given due credence to the judicial pronouncements and has considered it necessary to continue its obligation towards the retirees by way of improvements in pension/ family pension and so on. When this is the fact, the moot question is that – is the wisdom of those who govern the country less than that of IBA when they state that there is no contractual obligation post superannuation?
Further, so far banks have not adhered to the issue of holding periodical meetings with Retired officers association.

8. In fact Pension and the Pension Trust is the umbilical cord that sustains the contractual relationship of an employee post retirement.

9. Further, If there are no contractual relations of an employee with the Bank post retirement, then why is that the IBA is discussing Wages and service conditions issues with majority of Union and Association leaders who are retirees although they may be representing their unions and associations.? Arguing further, whether Public Sector Banks have given the mandate to discuss Wages and Service conditions issues with retirees? Going by the same logic, IBA should take the stand that they would discuss wages and service conditions issues only with serving employees. IBA could have just followed SBI’s stand of discussing service condition matters only with serving employees. The fact of the matter is that IBA has a set of unprofessional people with old mindset and negative frame work of mind who do not know the difference between a Superannuation /retirement benefit / social security measure and welfare scheme and worst of all they do not want to see the issues in a broader canvass. They are cosy in dealing with these “re-tired” netas who have neither the time to apply their mind nor do they understand the law of the land leave alone various decision of the courts on the issue.

10. We may further point out that the Board of LIC as well as RBI has considered the issue of updation of pension and have recommended to the Government for consideration. Does it mean that LIC Board has acted without understanding the issue of “contractual relationship”?

11. PSBs represented by IBA should act responsibly as a representative of model employer rather than discarding all the Pensioners in the same manner in which some children discard their parents once their purpose is over.

12. Pension fund which is primarily for the benefit of pensioners is being managed without any representation from pensioner. Sometimes the pension fund yielded negative return due to wrong investment strategy adopted by trustees and who is responsible for this irresponsible investment strategy ? If there is no contractual obligation then why our (retirees)demands were included under ‘”CHARTER OF DEMANDS” by UFBU AND OFFICERS CONFEDERATION?
Refereeing to repeated comparison of pension scheme in banks to Government pension scheme, IBA stated that while the Government pays pension out of Budgetary allocation, bank pension is a funded scheme. At the time of retirement of an employee, the bank is expected to ensure that adequate funding is made for payment of pension/ family pension with provision for periodic updation of dearness relief payable. As such there is no provision for updation of pension in Banks. Financial implications will need to be fully examined before any change in benefits payable to pension
· I am happy that IBA has admitted impliedly that there is a need for the Banks to make provision for various pension related issues whereas the Government doles out money for pension related issues out of Budgetary allocation.

· Why there cannot be any comparison of pension scheme in Banks to Government pension scheme when the entire Pension Regulation introduced in PSBs is based on Government Pension Scheme. In fact the residuary provisions of PSBs pension scheme states as under :

Residuary provisions - In case of doubt, in the matter of application of these Regulations, regard may be had to the corresponding provisions of Central Civil Service Rules,1972 or Central Civil Services (commutation of pension) Rules, 1981 applicable for Central Government employees with such exceptions and modifications as the Bank, with the previous sanction of the Central Government, may from time to time, determine.

1. Now on the issue of “Financial implications” and “adequacy of Funds”: – on this issue we have to refresh the memories of our bankers is that even before the introduction of Pension scheme, IBA was singing the same song of “huge financial implications”, PSBs going to red etc., but see what has happened. The Pension scheme has been introduced, trusts have been established and provisions for pension fund based on actuarial calculation are being made.

2. Further, IBA has been raising this bogey time and again without putting on table what is the financial implications. It is rather unfortunate that the UFBU has also been buying this argument over the years. On the other hand, the undersigned have given the details of the Pension fund position as on 31-3-2014 of public sector banks in my letter dated 24th Feb,2015 which is already in the Public domain. The IBA or the UFBU or any authority should contradict the same with cogent reasons and come out with their figures. Nothing of sorts is happening other than making statements in the air.

3. The IBA had ample time and resources at its command to gather this information for over more than 4/5 years yet they have chosen to make such statements. Infact, immediately after the demands relating to retirees were made, IBA should have got the data but they have chosen to keep quiet for more than 900 days for obvious reasons.

4. Further, is it not true that PSBs have been lending to unscrupulous borrowers like Mr. Vijaya Malaya, Winsome Diamond and a host of others under political influence or pressure from the top management of the Bank? Is it not true that PSBs have taken over accounts from other smaller PSBs under instructions of CMDS with increase ranging between 15 to 25 % knowing very well that these accounts are already showing signs of NPAs? Is it not true that many of these accounts have been restructured within short span of time and are potential NPAs for which provisions have to be made if not today, tomorrow? Are we not aware of the fact that some of the CMDs have worked only to manage the Balance Sheet in order to show to the Minstry of Finance of their performance and pocket the incentives in lakhs? Are we not making provisions for willful defaulters in good measure? The irony of the situation is that those who are looting the PSBs are enjoying the funds whereas those who have toiled hard giving their brain, brown and blood are being discarded with the statement that there is no “contractual relationship, inadequacy of funds etc., The worst part of this irony is that the leadership of UFBF is accepting these ludicrous averments of IBA without even a whisper.

5. See the meek manner in which IBA succumbed to the oral diktats of former Finance Minister when the issue of payment of Pension to those who were elevated as EDs and CMDs. The IBA floating all the rules issued instructions to PSBs to pay the Pension without raising any attended queries.

6. Now understand why the UFBU leaders have meekly accepted these statements from IBA. This is because, the Workmen Directors and Officer’s Directors on Boards of PSBs barring few have been a silent spectators to all the rot that is going on in PSBs. They have been enjoying the benefits of being a Directors and in some case these Directors have been pampered with by these Chairman. Hence, the result is obvious. You and I have to suffer for some one’s inefficiency – read enjoyment of benefits.

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On LFC and Hospitalisation
Hospitalisation scheme would be extended to retirees also but subject to the condition that cost of the insurance premium would be payable by retirees.
In RBI Group Insurance policy grade wise is available with ceiling in limits; such a scheme is required without payment of insurance premium as available in RBI. On LFC parties cannot take arbitrary decision; Even in case of Government Employees, Medical facilities are available post retirement. The need for Hospitalisation is more pronounced since officers of the Bank work under stressful conditions taking huge risk which is reflected in the form of health issues post retirement. This fact is admitted by even the UFBU.
Family Pension
While the IBA is sympathetic to the issue, the cost involved is significant and unaffordable at the present juncture. IBA will examine cost implications and sustainability of each bank, at a future date.
Here again, IBA has not come out with facts and figures. Future date should be certain and it cannot be vague. Improvement in Family pension is implemented in RBI. Our scheme is on the lines of scheme available in RBI and Government. So this need not be discussed, as it is already settled issue and it should be implemented from the effective date as the date of implementation in RBI.
100% D A Relief
Firstly the matter is sub-judice as certain cases on this issue are pending for a decision with SC. As such IBA cannot take a decision at this stage. From a humanitarian point of view, IBA may examine feasibility of providing 100% dearness relief neutralisation to pre-November retirees based on a detailed costing exercise
This issue is implemented in RBI. Our scheme is on the lines of scheme available in RBI, so this need not be discussed, as it is SETTLED ISSUE and it should be implemented from the effective date from FEB 2005 as the date of implementation in RBI. They have to refer the clause 12 of the pension settlement dated 29.10.1993, which says that, Provisions will be made by a scheme, to be negotiated and settled between the parties to this Settlement by 31st December, 1993 for applicability, qualifying service, amounts of pension, payment of pension, commutation of pension, family pension, updating and other general conditions, etc. on the lines as are in force in Reserve Bank of India. Another ridiculous stand how can they mention “subjudice” when in the past “Revision in pension” and “Five year notional service” and “2ND option for pension “were implemented when the relative matters were “SUBJUDICE”?
On upgrading the Basic pension at the common and uniform index of 4440 points
IBA would examine the cost implication and sustainability of member banks.
Section 10 (7) Banking Companies ( Acquisition and Transfer of Undertakings ) Act, 1970 says “After making provision for bad and doubtful debts, depreciation in assets, contributions to staff and superannuation funds and all other matters for which provision is necessary under any law, or which are usually provided for by banking companies, a corresponding new bank [may out of its net profits deal are a dividend and retain the surplus if any.” That is to say, our issues of superannuation funds has prior charge over net profit. Provisions for advances, depreciation on assets and other provisions are made automatically without noise in the banking industry by banks and sustainability of individual banks is thought of at this juncture, when the question of retiral issues of superannuation funds comes IBA ad UFBU make big noise and talk without the base of legal plat form.
Up gradation of pension for all existing and family pensioners
In view of Huge additional cost involved in funding the Pension Fund as per the requirements of AS-15-R, it would be impossible to consider this demand.
Section 10(7) Banking companies (acquisition and transfer of undertakings ) act 1970 and settlement dated 19.10.1993 para 10, prevails over the Accounting Standard – 15 [Revised 2005]. Hence there is no meaning in the stand of IBA and UFBU. What is the huge additional cost is not quantified, without such quantification; the argument/stand of the signatories will not survive the test of law. I also do not understand as to why they kept quite for more than 900 days during which period IBA could have easily collected this information from banks
Periodical updation improvement in pension along with occasions of wage revision of in-service employees on the lines of central government.
This being a funded scheme in lieu of contributory PF, as it is banks are contributing several times to statutory PF contributions towards funding pension scheme every year. Hence providing for periodic updation is not possible as this will have serious impact on the working of the banks.
My observations as above on affordability etc remains the same on this issues. Section 10(7) Banking companies (acquisition and transfer of undertakings ) act 1970, says, after making provision for bad and doubtful debts, depreciation on assets, staff cost and superannuation benefits, other provisions required under law, net profit can be used for payment of dividend to the owners. The import of the above is that :

1. Provision is to be made for bad and doubtful debts, whereas after the reforms and as per IRAC provision is to be made on sub standard assets also. Legally speaking, provision on sub standard is an additional stress on the profits.
2. Further provision is made on standard assets also as per international standards and that is also additional stress on the profits.

3. Depreciation on assets is to be made,
4. other provisions as per law to be made,
That is 1 to 4 above are automatic and compulsory and at the time of making automatic and compulsory provision on the above 1 to 4, nobody talks about sustainability of banks. Sometimes provisions have eroded the reserves and capital and central government has pumped in additional capital from the resources of tax payers.
5. When staff cost and superannuation cost, is to be made, this is the struggle the pensioner has to make, when his legal right is to be enforced.

Government guidelines permit banks to provide benefits to retirees out of Welfare Funds. This may be taken up at the bank level.
First of all banks have to entertain discussion with representatives of retirees and their representative should be on the board of welfare fund. In Bank of Baroda, Welfare fund is misused for payment of canteen subsidy to in service employees against the central government guidelines. The one of the signatories of this Record Note of Discussion is from Bank of Baroda, is well aware of this illegal payment. But he maintains silence against his own conscience.

It is high time that pensioners are given representation in Pension Trust, Welfare committee and in the negotiating committee so as to ensure that the interest of pensioners are not short shrift. It may be further noted that inspite of clear cut direction from your department to IBA to negotiate the retirees demands with the representative of the Apex retirees organization IBA did not call the retirees organization representative in blatant violation of your organization and released the record note of discussion on retirees issue on 25-5-2015. For the above disrespect to your direction stern action needs to be initiated against the Chairman , CEO and Personal Committee members of IBA

In the light of what has been stated above I request you and the Hon’ble Finance Minister to give direction to IBA AND CMDS OF PUBLIC SECTOR BANKS to resolve all the pensioners issues which are included in the “charter of demands” as stated above immediately and at the same time the resignees and the CRS be granted 2nd pension option to those who have completed 20 years of service in the bank

Thanking you,

Yours sincerely

And on behalf of thousands of affected retirees.





MUMBAI 400051

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