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Thursday, Jul 17, 2003

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Pension is `too small' for bank chairmen

Rukmani Vishwanath

One top public sector bank chairman confided, that when he retires, he will only get a pension of around Rs 5,000.

Mumbai , July 16

WHEN George Foreman, American Boxer, was asked by a journalist, when he would retire from his boxing career, he said, "The question isn't at what age I want to retire, it's at what income"! It is said, that Mr Foreman still has his gloves on.

Chairmen of some of the public sector banks in India are facing a similar dilemma; only, they do not have the same choice that Mr Foreman has. At the age of sixty, they have to step down from office. But the question is at what level of income?

One top public sector bank chairman confided, that when he retires, he will only get a pension of around Rs 5,000. "The amount is too small and how is one suppose to provide for the needs of ones family or himself after retirement?" he said. "After earning a salary in the range of Rs 30,000-Rs 40,000 per month, the pension should at least come to Rs 15,000-Rs 20,000 per month if one is to live comfortably post-retirement," he added.

The problem is, a chairman's pension is calculated on the basis of his basic salary at the time he was a general manager. Once the general manager is promoted to the position of Executive Director, Managing Director or Chairman, he is deemed retired from the banking services as these positions are considered to be government appointments.

To get a full pension, the candidate must have completed at least 33 years of banking service. His tenure of service, from the time he gets promoted to the position of executive director etc, is not taken into account. For example, if a banker has completed 20 years of service, then his pension would work out to, 20 divided by 33.

Hence, if an extremely enterprising person climbs up the corporate ladder fast and becomes executive director at an early age, or within 15-16 years of service, he ends up paying a bigger price for it from his pension.

Top bankers who are on the verge of retirement have asked the Indian Banks Association to take up the issue with the Finance Ministry. The IBA is understood to have approached the Ministry with the suggestion that the services rendered as Executive Director and Managing Director, should also be reckoned for the purposes of calculating pensions.

The association will also be taking up with the Ministry, the issue of wide disparities in the salaries of public sector bank chairman and private sector bank chiefs, in an effort to push for better pay scales in top ranks of public sector banks.

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