RBI clamps down on banks delaying pension payout

Central bank wakes up to inordinate delays in payments faced by government pensioners; reprimands bankers and directs them to make good the dues immediately, along with penal interest

In what could be a major victory for government pensioners awaiting pension payments, the country’s central bank, the Reserve Bank of India (RBI), has taken bankers to task for ‘inordinate delays’ in disbursing revised pension and arrears.

Taking a serious view of the matter, the RBI has issued a circular (dated 9 April 2010) to various banks with an exasperated tone, directing the concerned banks to ensure that all entitled pensioners are paid their revised pension or arrears within 15 days from receipt of the circular. Additionally, it has also advised the banks to make a penal interest payment of 2% for any delay beyond the due date.

The RBI was forced to take this tough stand after receiving several complaints from pensioners, especially State government pensioners, alleging inordinate delay in disbursing the revised pension and arrears. Under the 6th Pay Commission recommendations, RBI had advised pension-paying banks to put in place a suitable mechanism so that pensioners could get the benefits announced by the government in the succeeding month’s pension payment itself. The controlling offices or head offices of agency banks were also advised to closely monitor and supervise the timely and accurate disbursement of pension to the pensioners.

An RBI review of the pension payment systems in various agency banks revealed the true story behind the picture. The circular highlights RBI’s findings as follows:
“Even though Pension Relief Orders were issued by the respective State Governments, there is inordinate delay ranging from one month to 18 months at the Agency Bank level in disbursing the revised pension as also the pension arrears. The delay was more pronounced in the case of those State Govt pensioners residing outside their States drawing pension from Agency Bank branches. To be specific, non-State resident pensioners have not received adequate attention and timely receipt of the revised pension/arrears for months together.”

The circular goes on to highlight the discrepancies of banks in administering the pension payouts. “Our experience was that customer service on pension payment matters was not effective at the branch level where customers normally interface with the front office,” said the central bank’s communiqué.

The RBI also makes note of the lack of coordination between the branches and the Central Pension Processing Centres, as also the absence of transparency in the calculation of the revised pension or arrears.

In a tone that is vividly indignant, the RBI questions the concerned banks’ indiscretions. “Pension payment is an agency function entrusted to you for a commission @ Rs60 per transaction and an amount of Rs487 crore has been paid to Agency Banks on account of pension disbursements alone during the year 2008-09. Although this is a significant income generating activity, it appears that it is still not given the due importance that it deserves.”

In view of the above, the RBI has advised banks to undertake review of the system of attending to customer service and have a pension accounts guide at all branches to assist the pensioners in all their dealings with the bank. Additionally, RBI has demanded that suitable arrangements be made, to place on the bank website details about the pension calculations, and made available to the pensioners at periodic intervals with sufficient advertisements to that effect.

With the RBI finally wisening up to the reality and putting its foot down squarely on the Agency banks, they will have to take a deeper look at their archaic systems and make life easier for pensioners. As the RBI rightly puts it, “Pension is the lifeline of the pensioners and any delay in affording their legitimate dues will rob them of the dignity of life to which they are entitled to”. 

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    Lt Col Pawan Wahi

    7 years ago

    I am a Defense Pensioner,entitled to 100% Disability pension.Disability pensions were
    revised in Aug 2011 by PCDA and circular issued to all Banks to pay arrears.SBBJ,Khatipura,Jaipur,did not pay till I saw the orders at Sainik Welfare Board,Dehradun and wrote to the bank,who referred matter to PCDA.Ihad to visit Jaipur and get the arrears released in Jun/Jul 2012.Please educate me how to claim the interest on delayed payment,and what will be rate at which the bank will pay.My arrears were approx Rs 9,70,000/-,paid in two installments.Lt Col Pawan Wahi(Retd),Email:[email protected] Mob:9219385969.Thanks for the action on RBI's part lots will benefit.GOD BLESS


    9 years ago

    Pensioners do not have access to circulars/notifications issued by authorities. RBI suggestion of uploading information on WEBSITE of respective banks is good.
    It is accepted fact that pension is to be credited on the day it is due. But some banks credit pension even for its own employees after business hours inconveniencing many retired pensioners.


    9 years ago

    Could any one forward me a copy of the RBI circular regarding timely payment of pension. Thanks

    Shibaji Dash

    9 years ago

    Pray the Banks listen to the Central Bank. Will RBI review the situation periodically?And take action against the recalcitrants putting the pensioners on notice about the outcome of its much laudable effort.

    K B Patil

    9 years ago

    This is one step that no one can find fault with. It is wrong for banks to trouble pensioners, some of them very old and having physical difficulties, this way. Three cheers to RBI. It shows that somebody in RBI has his heart in the right place!!

    Weakness to resurface

    Global cues will continue to weigh on domestic bourses

    The market was on a strong note on earnings optimism. However, concerns over overvaluation and possible further tightening of the monetary policy limited gains. The Sensex ended 101 points higher (0.5%) at 17,574 and the Nifty was up 24.5 points (0.4%) at 5,269. The market was up after subduing early volatility. In afternoon trading, it touched the intraday high. However, it pared a lot of its gains soon after, as it took a sharp slide from that point.

    Asian stocks fell on Thursday as several major US firms issued disappointing profit outlooks, casting doubts over the strength of the global recovery, and as investors grew impatient for action over Greece’s debt crisis. Key benchmark indices in China, Hong Kong, Japan, South Korea and Taiwan fell by 0.15% to 1.27%. Key benchmark indices in Indonesia and Singapore rose by 0.25% to 0.26%.

    US stocks remained flat on Wednesday as disappointing earnings outlooks from healthcare companies offset strong earnings from Morgan Stanley. The Dow edged up 7.86 points (0.07%), at 11,125. The S&P 500 dipped 1.23 points (0.1%) to 1,206. The Nasdaq inched up 4.3 points (0.17%) to 2,504. Germany has said that Greece may not avail of EU and IMF aid packages by mid-May.

    Closer home, food inflation rose 17.65% in the year to 10 April 2010 and the primary articles’ index rose 14.14% in the year to 10 April 2010, latest government data showed.

    The government is likely to issue new benchmark 10-year bonds by end-May or early-June. Iron ore exports declined in February as the government banned illegal mining. Exports were down 2.3% in February from the year-ago period. The government action taken on July last year has closed down 60 mines in Orissa.

    The IMF has said that the global economy is recovering from the recession more quickly than expected. However, the rescue effort has put pressure on public finances. The entity projected India’s growth at 8.75% for calendar year 2010 and 8.5% in 2011. It expects demand in India to improve with the improvement in the labour market and investment.

    Foreign institutional investors were net buyers on Wednesday of Rs82 crore. Domestic institutional investors were also buyers of Rs25 crore. The rupee gained in the late afternoon, on dollar sales.

    Valecha Engineering (down 1.1%) has bagged two projects. The first project is for the Paradip project of Indian Oil Corporation. The second project is for the construction of a 35-km road in Chhattisgarh. Aban Offshore’s (down 1.3%) joint venture, Venture Drilling and Maersk Oil Angola (Maersk Oil) have reached an agreement to amend their drilling contract relating to drillship Deep Venture. Maersk Oil will redeliver the drillship upon completion of the Chissonga-2 well in Angola, around April 2010. XL Telecom and Engineering (up 10.1%) has said that that it will raise funds up to $100 million by issue of securities. The board of Sasken Communication Technologies (up 5.6%) in its meeting on 22 April 2010 has recommended a final dividend at the rate of Rs4 per share (40%) for the financial year ended 31 March 2010. Tata Motors (up 3.3%) has said that its Sanand plant will start production by 30th April and make up to 2.5 lakh Nano cars a year. Kale Consultants (down 1.2%) posted a growth of 34% and 73% in sales and operating profit in the March quarter, over the year-ago period.

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    Audacious IPO by loss-making Nitesh Estates backed by investment from Times Group

    Limited operations, poor track record and bad fundamentals make the stock hugely overvalued

    Nitesh Estates Ltd, a Bengaluru-based real-estate firm, hits the market on 23 April 2010. The company was looking to price its shares in the band of Rs120-Rs128 but had to cut it by more than half to Rs54-Rs56, sensing that investor response would be poor. Indeed, it is quite audacious of Nitesh Estates to even think of coming up with the IPO. For the nine months ended 31 December 2009, the company suffered a loss of Rs1.32 crore. For the financial year ended March 2009, it had a negative cash flow of Rs46.87 crore.

    Interestingly, the company has made a pre-IPO placement to Brand Equity Treaties Ltd (BETL), owned by Bennett, Coleman & Company Ltd, owners of the Times Group, at Rs143 per share on 19 February 2010 for 10 lakh shares aggregating to Rs15 crore. This is the main reason one can see large advertisements by the company in various publications of the group. Under such deals—called private treaties—the Times Group takes a stake in an upcoming company in return for low-rate advertisements.

    Incorporated in 2004, Nitesh Estates primarily develops residential projects in Bengaluru, despite the fact that it has expanded its operations in Chennai, Kochi, Goa and Hyderabad. As of 20 March 2010, the company’s seven ongoing projects and four forthcoming projects comprised a combined saleable area of 3.64 million sq ft, out of which 2.65 million sq ft or 72.8% was located in Bengaluru. The company is also developing a hospitality project in Bengaluru and a residential and an office project in Kochi.

    As on 20 March 2010, the promoters have pledged 3.01 crore (42%) pre-issue shares to lenders under a debt agreement. The lenders can sell these shares in the open market in the event of a default and can dilute the shareholders’ stake. As of 31 December 2009, the company’s total borrowings on a consolidated basis were Rs194 crore.

    According to the prospectus filed with SEBI, the proceeds of the IPO will be utilised to acquire joint development rights for the company; fund existing subsidiaries and the associate company; for repayment/prepayment of loans; redemption of debentures; finance ongoing projects and financing the acquisition of joint development rights and to repay certain loans of the company.

    ICICI Securities Ltd, Enam Securities Private Ltd, Kotak Mahindra Capital Company Ltd and JM Financial Consultants Pvt Ltd are the lead book-running managers to the issue.

    The company plans to mop up Rs450 crore from the issue with a 100% book-building issue. The price band has been fixed at Rs54-Rs56 per share. The issue opens for subscription on 23 April 2010 and closes on 27 April 2010. Credit ratings agency CRISIL has assigned an ‘IPO Grade 2’ to the IPO, indicating ‘poor fundamentals’.

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    ramesh b

    9 years ago

    Good report! Stand.ChrtIDR-report was also equally good! pl keep yr torch 'on' in 'andher nagari'..thanks

    Shibaji Dash

    9 years ago

    SEBI will not be effective so long as it remains a kind of attached office of North Block.It is poorly staffed compared to the task.Thouugh young in age its teeth have become broken and blunted, and the gums loose and placid like that of one waiting to go up to meet its maker.

    Kingshuk Mukherjee

    9 years ago

    The Entire Real Estate Industry in India and specially in Mumbai is playing the "Greatest CON GAME" ever or DAYLIGHT ROBBERY of the Gullible Indian by comming out with these CRAP IPO's. I am completely agree with Govind SEBI is NOT ONLY SLEEPING it seems to gone into COMA, maybe it's time to bring a DICTATOR with powers to shoot at Real Estate developer including all the Merchant Bankers, the PR Agencies and last but not the least the "NEWSPAPER' that carries the FRAUDULENT Advertisments and planted STORIES trying to FOOL the the public. I sincerly hope Mr. Bhave wakes from up his COMA and stops this on-going OPEN FRAUD from the CROOKS, CHORS, FRAUDSTERS AND CRIMINALS Real Esate and Developers community. By the way LODHA is struggling to get its IPO on track AND IS BUSY FOOLING AROUNG selling the public GARBAGE FLATS IN THANE and other PLACES in the outskirts of Mumbai which in MIDDLE OF NOWHERE at ONE CRORE PLUS......The whole REAL ESTATE INDUSTRY in Mumbai has created yet another BUBBLE so it's question of NOT IT but WHEN this BUBBLE will burst.

    Shibaji Dash

    9 years ago

    If they in US they have MBAs(Finance ) from Harvard et al at Wall Street trained in carpetbagging the world, we have our desi versions trained in IIMs/Harvard etc to indulge in collusive incests to fool the gullibles for loot and laundering. There is no easy answer to this except for cautions to the literates by Money life's painstaking researchers Thanx.


    9 years ago

    What are the eligibility criteria for any co to file for IPO? What is the regulation against private treaties / interested party dealings that influence public?


    9 years ago

    Dear All,

    The entire universe is full of people like Nitesh conspiring to take my hard earned savings out of my wallet.

    I need to be alert and careful.

    By the way, is Chandu Bhave of SEBI sleeping ???? zzzzzz


    9 years ago

    SEBI seems to think by accepting a filed copy of the draft prospectus, its responsibility ceases. The retail investor does not have the knowledge to read thro the pages of the prospectus and make an informed decision. He is misled by the unsrupulous merchant bankers and glossy ads. Before CCI would allow the premium only if there is profits for last three years. Buyers Beware seems to be the mantra now. Alas the buyer does not know that. Many thousands of companies have vanished after the IPO and are rarely traded. Public have lost thousands of crores. Who cares? Is this capital market regulation?

    Sapna Malya

    9 years ago

    Can Sebi as regulator not interfere in the IPO being listed? How will a retail investor who subscribes to the issue without knowing the profitability of the company be then protected? Is it not necessary for the company coming out with an IPO to make good their financials and then attract investors?

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