Public sector banks have played a historically stellar role in financial inclusion and the development of the social sector. They have been the backbone of the government’s socio-economic agenda and have made a transformative impact on the country’s development landscape. But sadly, the contribution of theri employees has not been adequately recognised.
The government has paid little heed to their worsening service conditions. While there have been paltry raises in salaries, there has been virtual stagnation in pensions for over two decades particularly when inflation has been soaring to such high levels.
Salaries in public banks are far less attractive than in private banks. The only consolation is the provision of pension which too has now been reduced to a measly sum by a strange and unjustifiable logic of the government. This logic doesn’t meet the test set out in several judicial pronouncements as also the stipulations of several publicly recognised welfare codes for senior citizens.
There may have been some black sheep in the industry that have tarnished the image of banks, but the entire fraternity cannot be made to suffer and atone for their misdeeds. We must understand that even government departments have suffered periodical reputational damages but that has never detracted us from the remarkable work of some of our outstanding civil servants.
The bureaucracy forms the bulwark of India’s public administration and the misconduct of some employees has not prevented the government from doing justice to the sector as a whole. So is the case with the public banking sector.
The employees have always delivered on official policies and programmes. In the absence of competitive salaries, the only motivation for keeping their morale intact is fairness with them in their service conditions. Their overall compensation should be commensurate with both the volume of work and the nature of risks involved in the operational roles. Originally, banks had two retiral benefits schemes -- Contributory Provident Fund and Gratuity. Employees wanted pension as a third retiral benefit.
In the Reserve Bank of India, the pension scheme was introduced from November 1, 1990. On October 29, 1993, an industry level settlement was reached between the Indian Banks Association and bank employee unions that paved the way for the introduction of pension scheme in lieu of the Contributory Provident Fund, as in the RBI. A similar joint note was signed with the federation representing officers also.
Para 12 of the settlement prescribed the a committee consisting of representatives of the IBA and the unions for fleshing out a scheme on similar lines as the RBI pension regulation and the Central Civil Services Pension Rules, applicable to Central Government employees.
Originally, these Regulations were contemplated to apply to the employees who retired after November 1, 1993, but later on, it was extended to the employees, who retired from January 1, 1986 onwards. According to Clause 12 of the Pension Settlement dated October 29, 1993:
“Provisions will be made by a Scheme, to be negotiated and settled between the parties of this Settlement, by December 31, 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.”
However, when salary revision for bank employees became due pensions were not considered for revision. Salaries, leaves, and other service conditions of public sector bank employees are decided by bilateral agreements entered into between management and employee representatives once every five years. But ironically, pension does not form part of this contractual arrangement. This is where the parallel between the government sector and the banking sector ends.
During the signing of the 10th bipartite settlement with the staff unions of banks, the Indian Banks Association (IBA, a pan-India federation of banks) clarified that "as banks do not have any contractual liability towards the pensioners, the demand for revision of pension along with salary revision cannot be accepted".
Pensions in government are typically inflation-indexed. This is not so in the case of bank employees. The pension of bank retirees is not revised/updated in line with the periodical revision of salaries as is done in the case of government employees where both salaries and pensions are simultaneously revised when the periodical Pay Commission’s wage revision take effect.
While the lowest grade government pensioner gets a proportional raise at every such revision, this is not so in the banking sector. Here, even a retired top-grade executive has to make do with a fixed pension throughout his entire life. He might have been at the helm of affairs of a large bank, enjoying attractive perks, but his post-retirement life is made miserable by the government logic that makes his plight worse when he is likely to be most in need of assistance and care.
In fact, the government is so magnanimous with its pensioners that it gives a few percentage points increase for those who have completed 75 years of age. This is further enhanced in higher age bands. This in indeed a laudable gesture and demonstrates not just policy wisdom but reflects the enlightened thinking of modern societies. All this logic is lost when the rules for bank pensioners are formulated, even though their case is identical. This contradictory approach smacks of bias and unfairness.
According to bank unions, basic pension for bank retirees has not been revised for almost two decades though inflation went up 10 times. The family pension in banking is only 15 percent while in the RBI and government, it is 30 percent. In some cases, the amount of pension paid for bank retirees is a measly sum of Rs 175 per month, not enough even for a monthly cable subscription for a TV.
In such a situation, old age is an increasingly scary prospect for bank employees. This position is quite contrary to even the basic notions of social protection for ordinary senior citizens. We are already moving to a social protection age where several countries provide old-age allowance and universal pension.
There is also a glaring anomaly in pension paid to officers of State Bank of India. While the workmen staff is paid pension at 50% of the last drawn pay, the officers staff is paid at 405 of the .The Supreme Court has held on July 1, 2015 in Civil Appeal No 1123 of 2015 viz State of Rajasthan & Anr Vs. Mehendra Nath Sharma & Ors that pension shall not be lower than 50 percent of the running pay banks corresponding to the pre-revised scales of pay in a scenario where pension is payable with a cost to the state, out of the exchequer.
This judgment casts no responsibility on the state to fund bank pension form the exchequer. Since bank pensions are self-funded this judgment should make it clear that there cannot be two categories of pensioners –retired workmen staff and retired officers staff.
In the case of bank pensioners where pension is payable with no cost either to banks or to government and such payment is out of the money, property and deferred wages of employees held in trust, pension is not revised ever since the inception of the Pension Scheme in 1995.
It is an acknowledged fact that the government’s socio-economic programmes have to make extensive use of the banking platform for both delivery and monitoring. It is public banks that have revolutionized rural India through the social banking era of the 1970s and the subsequent village adoption and branch expansion regime.
Public banks continue to remain the primary hope for India’s financial inclusion agenda and delivery of its development programmes. They are the one-stop delivery platform for all financial needs of the local rural populace. With financial inclusion being universally recognized as an important tool for alleviating poverty and improving the lives of the unprivileged, it is all the more important that we address some of the appalling working conditions of bank employees.
One of the reasons adduced for denial of the claim of bank staff for commensurate wages and pensions is India’s pile of soured loans. One must understand that this is only part of the making of bankers. It is actually a classic example of how powerful and politically influential tycoons have undermined financial norms and bank regulations to secure credit and then default on it.
The Indian banking system is beleaguered by a mounting pile of troubled loans. The proportion of bad debts, where the borrower is not making interest payments or not repaying any principal, has surged to such horrifying levels that the banks are creaking under the strain.
Several financial storms have rumbled on in the financial system, a third of which is on crutches. A prolonged shadow lending crisis has added a massive bad loan pile at Indian lenders with a lion’s share of those being with the state banks.
The perverse behaviour of promoters of ailing businesses has led to a situation where precious money of taxpayers has to be to be used to clean the poison that has leached the financial system. The question is – why should ordinary people bear the burden of the fat cats? These freeloaders are remorselessly winnowing scarce bank capital and creating financial mayhem.
The perverse behaviour of promoters of ailing businesses has led to a situation where precious money of taxpayers has to be to be used to clean the poison that has leached the financial system. The question is – why should ordinary people bear the burden of the fat cats? These freeloaders are remorselessly winnowing scarce bank capital and creating financial mayhem.
Politicians are guilty of undermining the integrity of banks. They have been stacking the decks with populist sops and have used banks as spigots
Most borrowers seem to have a deep aversion to repaying bank loans. In several cases, they have adequate assets and capital to redeem the debt but avoid doing it. Things have turned so bad that whether it is an individual or institution, getting back any money at all is a reason for celebration. We have seen several business leaders splurging on lavish extravaganzas and misdirecting capital into expensive vanity projects, but reneging on loan promises.
But why should the bank staff be penalized for this conundrum? This is in fact further compounding the whole problem. We have dedicated forums that are already dealing with the malfeasance of individual staff. But the general criticism and censure of the entire banking community seriously impacts the morale of employees.
But why should the bank staff be penalized for this conundrum? This is in fact further compounding the whole problem. We have dedicated forums that are already dealing with the malfeasance of individual staff. But the general criticism and censure of the entire banking community seriously impacts the morale of employees.
We must not forget that the momentum created by the earlier generations of bank employees continues to propel the workforce even in the face of a pandemic like Covid-19. We all know the huge casualties that public banks have suffered during demonetization.
Politicians are also guilty of undermining the integrity of banks. They have been stacking the decks with populist sops and have used banks as spigots for burnishing their election credentials. Most big defaulters have the money to employ legal eagles who can game the judicial system—it is here that the law flounders. India has some of the most draconian laws in books, which have sadly proved ineffective against powerful dodgers.
We keep adding new laws when the existing ones are adequate and just need more teeth to get results. Most of our laws lack imagination and foresight and it takes a long time to make them roadworthy. Many of them don’t meet the tests of judicial scrutiny.
A moot point is that the government has to shoulder the additional financial burden required for the pension revision of its employees, which is usually done by adjusting the tax rates which increases their revenue to meet this additional expenditure. Thus, government pensions have to be funded by the taxpaying public.
Most banks are already making provisions for pensions by setting apart portions of their profit towards pension reserves. Thus, in the case of bank employees, pension is paid without any outgo of revenue on part of banks or government as such payment is made out of the reserves.
This reserve represents money, property, and deferred wages of employees that are held in trust by the banks themselves. In the case of the State Bank of India, the trustees of its Pension Fund have over the years built an adequate corpus for meeting future pension obligations. It is considered sufficient to meet pension liabilities for a long future.
The Supreme Court has ruled that pension is a deferred wage payable to a retiree and hence it is the statutory responsibility cast on the employers. The Supreme Court’s epochal observation in a different context (Assistant General Manager, State Bank of India v. Radhey Shyam Pandey, March 2, 2020) has relevance in the present context also:
“The basic framework of socialism is to provide security in the fall of life to the working people and especially provides security from the cradle to the grave when employees have rendered service in heydays of life, they cannot be destituted in old age, by arbitrarily taking action and for omission to complete obligation assured one.”
In public banks, the pension structure was designed exactly on the principles that were applied to pensioners of the Reserve Bank of India. In compliance with clause 6 and 12 of the Memorandum of Settlement dated October 29, 993 between Indian Banks’ Association and All India Bank Employees Association, entered into under the Industrial Disputes Act, it was clearly specified that the general conditions of pension scheme in banks shall be on the lines of the RBI Pension Scheme.
The government had at one stage declined the RBI employees' demand for revision of pension on the lines of government employees on the ground that it would have a contingent effect, and would lead to similar demands from other public sector banks. The financial burden of updating pension in the RBI was Rs 858 crores while the bank’s pension corpus was around Rs 12,000 crore.
The government had to finally agree because the logic was on the side of RBI employees. RBI pensioners got a notional rise of 10 percent in their salaries plus dearness allowance with each of the three wage revisions in 2002, 2007, and 2012. In the case of public banks too, the corpus available is far larger than the actual financial burden involved in the payment of pensions.
Politicians are also guilty of undermining the integrity of banks. They have been stacking the decks with populist sops and have used banks as spigots for burnishing their election credentials. Most big defaulters have the money to employ legal eagles who can game the judicial system—it is here that the law flounders. India has some of the most draconian laws in books, which have sadly proved ineffective against powerful dodgers.
We keep adding new laws when the existing ones are adequate and just need more teeth to get results. Most of our laws lack imagination and foresight and it takes a long time to make them roadworthy. Many of them don’t meet the tests of judicial scrutiny.
A moot point is that the government has to shoulder the additional financial burden required for the pension revision of its employees, which is usually done by adjusting the tax rates which increases their revenue to meet this additional expenditure. Thus, government pensions have to be funded by the taxpaying public.
Most banks are already making provisions for pensions by setting apart portions of their profit towards pension reserves. Thus, in the case of bank employees, pension is paid without any outgo of revenue on part of banks or government as such payment is made out of the reserves.
This reserve represents money, property, and deferred wages of employees that are held in trust by the banks themselves. In the case of the State Bank of India, the trustees of its Pension Fund have over the years built an adequate corpus for meeting future pension obligations. It is considered sufficient to meet pension liabilities for a long future.
The Supreme Court has ruled that pension is a deferred wage payable to a retiree and hence it is the statutory responsibility cast on the employers. The Supreme Court’s epochal observation in a different context (Assistant General Manager, State Bank of India v. Radhey Shyam Pandey, March 2, 2020) has relevance in the present context also:
“The basic framework of socialism is to provide security in the fall of life to the working people and especially provides security from the cradle to the grave when employees have rendered service in heydays of life, they cannot be destituted in old age, by arbitrarily taking action and for omission to complete obligation assured one.”
In public banks, the pension structure was designed exactly on the principles that were applied to pensioners of the Reserve Bank of India. In compliance with clause 6 and 12 of the Memorandum of Settlement dated October 29, 993 between Indian Banks’ Association and All India Bank Employees Association, entered into under the Industrial Disputes Act, it was clearly specified that the general conditions of pension scheme in banks shall be on the lines of the RBI Pension Scheme.
The government had at one stage declined the RBI employees' demand for revision of pension on the lines of government employees on the ground that it would have a contingent effect, and would lead to similar demands from other public sector banks. The financial burden of updating pension in the RBI was Rs 858 crores while the bank’s pension corpus was around Rs 12,000 crore.
The government had to finally agree because the logic was on the side of RBI employees. RBI pensioners got a notional rise of 10 percent in their salaries plus dearness allowance with each of the three wage revisions in 2002, 2007, and 2012. In the case of public banks too, the corpus available is far larger than the actual financial burden involved in the payment of pensions.
But the government doesn’t want to apply the same principle to public banks. Maybe, the RBI clout was too strong to be overlooked. In addition the workforce of RBI was much smaller than that of public banks. According to bank unions, the pension corpus of public sector banks is at about Rs 1,71,418 crore, which is 14.28 times of RBI’s pension corpus. Thus fair pensions are not only necessary for bank employees, but they are also affordable for most banks.
With the government having shown both wisdom and prudence in revising/updating the pension of employees of RBI, one hopes it will show the same prudence in the case of public banks. The PSB employees deserve the undoing of this long-entrenched injustice.
With the government having shown both wisdom and prudence in revising/updating the pension of employees of RBI, one hopes it will show the same prudence in the case of public banks. The PSB employees deserve the undoing of this long-entrenched injustice.
Their service conditions require a serious relook. Their work involves physical and mental discomfort as well as great risks. Many of them have to work in hard geographical and climatic terrains and are constantly exposed to threats of fraud and even physical assault.
Banking has always served as the chariot of India’s development success. Behind this gleaming image is the largely undocumented saga of grassroots employees of banks, particularly those who are engaged in development work in remote locations. The work of these employees may not command great attention; but in merit, it may equal or exceed the greater and more conspicuous actions of those with more freedom and power.
When it comes to compensation, one or more issues often get mixed up. There is talk of money buying talent but not a commitment, the development banking sector needing a high level of commitment, and so on. This may be true, but one must not forget that a large number of competent, committed, and concerned people would not venture into the banking profession if it did not secure their future financially.
---
*Development expert
Banking has always served as the chariot of India’s development success. Behind this gleaming image is the largely undocumented saga of grassroots employees of banks, particularly those who are engaged in development work in remote locations. The work of these employees may not command great attention; but in merit, it may equal or exceed the greater and more conspicuous actions of those with more freedom and power.
When it comes to compensation, one or more issues often get mixed up. There is talk of money buying talent but not a commitment, the development banking sector needing a high level of commitment, and so on. This may be true, but one must not forget that a large number of competent, committed, and concerned people would not venture into the banking profession if it did not secure their future financially.
---
*Development expert
Comments