The Hindu Business Line : Banks’ pension option

This is with reference to “Pension option: Actuaries’ report lifts staff hopes” (Business Line, November 14). The gap of Rs 18,000 crore in the two workings brings to light that the actuarial exercises on additional burden on pension are a mere statistical gimmick.

The Rs 6,000-crore burden projected is false since the Pension Fund will have enough surpluses when the CPF balances, together with interest up to date, of those who get fresh option, comes to the Pension Fund through the option. If the Pension Scheme had not been introduced, banks would have had to continue to contribute to the CPF in respect of those who are now covered under it also.

A backlog of 12 years has now been created in respect of 30 per cent of bank employees. Reckoning an average monthly contribution of Rs 1,500 per employee and half-yearly interest at 8.5 per cent on it, the amount works out to Rs 13,077 crore. Banks converted this establishment expenditure to profits and kept it as reserves in the post-1995 period. When the remaining 70 per cent (7 lakh) get the pension coverage through the fresh option, their CPF balance, averaging about Rs 8 lakh, would augment the Pension Fund by another Rs 56,000 crore.

The total infusion will be not less than Rs 69,000 crore. Besides, it is not fair to treat the option as a second option. The scheme sanctioned in 1995 contained a clause enabling banks to forfeit the entire past services of an employee in case of participation in strike even for a single day. This was why most employees abstained from joining the scheme. When this clause was scrapped through Gazette Publication on February 27, 1999, the offer terms got radically changed.

The option under the present Pension Scheme was not extended to those who were not covered already when the amendment took place, in spite of the fact that they were legally entitled to it.

C. N. Venugopalan e-mail

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