Pension Revision is the Demand of Bankers, Ex-Gratia is Not the Solution

Demand for pension was raised by bank employees in early nineties and a “Pension Co-Ordination Committee” with Com. Samir Ghosh, the then General Secretary of All India Reserve Bank Employees Association, an affiliated unit of Bank Employees Federation of India, spearheaded the agitation demanding “PENSION AS THIRD RETIREMENT BENEFIT’.  All  except one organisation from banks, from other financial services viz. LIC, GIC, RRBs, RBI, NABARD, UTI, etc. took part in this mass campaign and agitation. The slogan caught the imagination of all bank employees cutting across trade union affiliations and a situation was created that the rulers, both IBA and Central Government, could not ignore the heat. It is a black chapter in the history that the only organisation which choose to stay away from the mainstream, provided a way out to the rulers by entering into an agreement (the Supplementary Pension Settlement of 1993) accepting pension as a second retirement benefit. 

The proposed pension scheme was in lieu of Contributory Provident Fund (CPF) benefit and employees were provided an option either to continue with CPF scheme or to switch over to the proposed pension scheme. After careful comparative analysis of the benefits, vast majority of employees choose to continue with the existing CPF scheme.  Over the passage of time, the CPF scheme became unattractive mainly due to drastic reduction in interest rates. Again a demand for “Second Option” was raised, prolonged agitations took place, and an opportunity for “second “option” was provided. It was at this point that the “contributory pension” called New Pension Scheme (presently termed as National Pension System) was introduced in banking industry. Accordingly, the entrants after 01-04-2010 were automatically covered under the new pension scheme. (The issues of NPS is a topic for separate discussion).

The bank pension scheme implemented from 01-11-1993 with retrospective effect from 01-01-1986, still continues without any change. This problem was faced in almost all pension schemes in the organised sector. But over the passage of time, a system of periodical revision came into practice in almost all areas, except banking. The present system of pension revision along with revision of salary is prevailing in Central Government service since the time of fifth pay commission in 1996.  Similar is the case with state governments and other public sector establishments. Demand for revision of bank pension scheme gained momentum and during the nineth bipartiate negotiations, the issue was raised by United Forum of Bank Unions. Outside, various organisations of retired bank employees also started raising this demand. Unfortunately, due importance was not given to the issue, either by the UFBU or by retiree organisations.

Why the Demand for Pension?
Pension is one of the important social security measure. It is based on the concept that it is the duty of the employers and governments to provide for a respectful and decent living to their workers after retirement, considering the services rendered to the institution and the country.  To do justice to this concept, the employers are duty bound to make revisions to the scheme taking into account the rate of inflation, change in standard of living, etc. The tendency at present all over the world is that the governments and employers are backing out from this social commitment.

The tendency to deny the legitimate demand of pension revision is part of this changed global approach. In India, the highest judicial forum had made a mention against this tendency. In the historic intervention, five judge bench judgement of the Hon. Supreme Court of India in the case of D.S. Nakara & Others Vs Union of India on December 17, 1982 had mentioned that 

Paragraph 31(i) ….. that pension is neither a bounty nor a matter of grace depending upon the sweet will of the employer and that it creates a vested right…

(ii)….that pension is not an ex-gratia payment, but it is a payment for the past service rendered…

(iii) …it is a social security measure rendering socio-economic justice to those who in the heyday of their life ceaselessly toiled for the employer on the assurance that in their old age, they would not be left in the lurch…

In the same judgement, Paragraph 42 reads…

Revised pay scales are introduced from a certain date. All existing employees are brought on to the revised scales by adopting a theory of fitments and increments for the past service. In other words, benefits of revised scale is not limited to those who enter service subsequent to the date fixed for introducing the revised pay scales, but the benefit is extended to all those in service prior to that date.  This is just and fair.  Now, if pension, as we view it, is some kind of retirement wages for the past service, can it be denied to those who retired earlier, revised retirement benefit available to future retirees only?

Please remember that the above quotes are from the judgement of a five judge bench of the Supreme Court of India. The Honourable court has categorically made it clear that 

1.  Payment of pension is not a bounty but a responsibility of the employer and right of the employee.
2. The benefit of periodical revision of wages should not be restricted to serving employees and future retirees, but should be extended to past retirees also. 

It was on the background of this judgement that the Central Government, State Governments and Public Sector establishments started the exercise of periodical pension revision. Unfortunately, the managements of the banks ignored this legal obligation and the trade unions, to certain extent, failed in bringing this to the attention of the IBA and the Union Government.

Even though the IBA and some other quarters argue to the contrary, it is a fact that provision for pension is inbuilt in the Pension Regulations 1993 and there is no provision in it preventing the revision of pension. It is pertinent to note that the pension scheme in RBI was revised twice during this period and the pension scheme in banks are drawn in similar lines with that of RBI. It is a great injustice that the authorities have not, till date, showed any inclination to do justice to their legal, social and moral obligation. The bank retirees are still subjected to this negligence and exploitation.

Why Revision?
As stated earlier, to ensure a decent living by compensating the inflation and raise in cost of living, periodical revision is essential and inevitable. In the absence of revision, the basic pension of an employee remains stagnant. As an example, the pension of a clerical staff retired during previous bipartiate settlements is given below.

To Make a comparision, given below is the pension of a Scale VII General Manager.

Please note that the pension of a Scale VII Officer working as General Manager retired during 7 BPS is less than the pension of a clerk retired during 9 BPS. The concept of “Special Allowance” was introduced only with the malafide intension of reducing the super annuation benefits.

Pension Revision is Feasible: No Paucity of Funds - No Additional Burden
The demand for periodical revision of pension is rejected by bank managements citing the reason that it will bring additional financial burden to the banks. The major difference of bank pension scheme with that of government employees is that it is a funded scheme and the payments are made out of a corpus called the pension fund. This fund is constituted mainly with

a) Contribution by the employer at the rate of 10 percent per month of the pay of the employee.

b) The accumulated contributions of the employer to the Contributory Provident Fund and interest accrued thereon.

c) Returns on investments and interests.

d) Additional contribution made by the employers in accordance with the clause 11 of the pension regulation.

Outflow from the fund will be towards payment of pension and family pension.

Study by AKBRF
All Kerala Bank Retirees Forum (AKBRF) made a study about the viability and financial feasibility of the pension scheme. Data from all nationalised banks including SBI and RBI was collected through the provisions of Right to Information (RTI) Act. Details such as the total number of pensioners including family pensioners, Funds available in the Pension Fund, Amount of pension disbursed, interest and gains received, other inflow to and outflow from the fund, etc. were collected. Details of employees likely to retire in the coming five years was also collected. The study was first conducted in 2018 and thereafter it was revised for the subsequent years upto 2022. As on 31-03-2022, total number of employees in service was 779021 and out of it, only 209920 are coming under the old pension scheme. Important data for the years 2018 March, 2021 March and 2022 March are given below.

From the above table, it is evident that 

1.  Balance in pension fund is increasing every year
2.  Payment of pension per year is less than the inflow every year. 
3.  Outflow to inflow ratio is 0.58 for 2018, 0.50 for 2021 and 0.39 for 2022.

From the above data, it is evident that the claim that any upward revision of pension will cause considerable strain to the financial position of the banks is baseless. There is sufficient balance available in the pension fund, and only a part of the inflow is sufficient enough to meet the current pension obligation. Split up details of bank wise data for all public sector banks are available, but due to space constraints, only relevant information is furnished. Some doubts as to whether entire amount of PF contribution and interest accrued thereon of the pension optees have been transferred to the pension fund, whether the banks have remitted interest for the amount transferred after delay (in some cases upto five years), etc also requires further investigation.

What is Needed
As the cry for pension revision is gaining momentum, the bankers have come out with an offer of Ex-Gratia payment. Retirees are not asking for any alms, but are demanding their legitimate right of pension revision. This demand is not to be addressed in an ad-hoc manner but to be solved scientifically. Pension scheme and subsequent revision in Reserve Bank of India is the model before us. In the Supplementary Pension Settlement of 1993, it is mentioned that the scheme will be similar to the RBI Pension Scheme. Another important factor to be considered is that only employees joined before 2010 only are covered under the old pension scheme. All entrants after 2010 are coming the NPS. (NPS is another form of gross exploitation which should be fought with all might). Both the schemes are covered under different funding system. Accordingly, by the time the last pensioner or family pensioner dies, the pension fund ought to be liquidated. Contrary to that, it can be seen that the balance in pension fund is going on increasing every year. While calculating the financial viability of the scheme, this aspect is also to be taken into consideration.

The issue of pension revision of bank retirees cannot be prolonged and dragged for ever. Almost all (except a few voluntary retirees) are above the age of 60 and running the last lap of their life. This legitimate demand will not cause any additional financial burden either to the banks nor to the Government. Sufficient funds are available in the corpus, which was contributed by the retirees and staff members during their service. It is high time that the organisations of the serving employees and retirees’ organisations come up strongly to fight against this cruel injustice and exploitation. With enhanced life expectancy and escalating cost of living, the pensioners of earlier years are under the threat of being thrown into the grips of poverty. It will not be definitely the reward for the services rendered by them to the banking industry and to the nation during their hey days.

[The Author is President, All Kerala Bank Retirees Forum and Vice President, National Federation of Retired RRB Staff. The views are personal.]