PSU bank staff meet to discuss pension cover

Public sector banks' employee unions are set to meet Indian Banks Association's officials this week to discuss ways to implement a pension scheme for nearly half of the employees of public sector banks who do not have a pension cover.

"We are meeting IBA representatives next week to discuss pension for employees of PSU banks who do not have a pension cover as they had opted for provident fund in 1992-93," GD Nadaf, representative of the United Forum of Banks Unions (UFBU), said.

While the unions are keen to work out a pension scheme for such employees, the management of most public sector banks feel that giving a second option to employees to opt for pension would be financially disastrous for banks.

The IBA has proposed an annuity scheme, under which the bank and employees will contribute 10 per cent of the salary to the fund and the returns will be market-determined with assurance on the corpus. This fund could be managed by the LIC.

"This is very inferior compared to the pension option. We will negotiate for improvements in the proposal," Nadaf said.

While most of the employees who had less than 10 years of service had opted for pension in 1992-92, most of the rest had gone with the Provident Fund option as the interest rates at that time were very attractive.

But at present, the PF rate has dropped to 8.5 per cent. While unions want the banks to manage the fund, this may not be possible as none of the banks other than SBI has expertise in managing pension money.

It is roughly estimated that 30 per cent contribution is needed to meet pension liability; therefore any move to shift employees to a pension scheme from the PF is expected to hit the banks' bottomline.

"Banks could go bankrupt as they cannot meet the liability of defined benefit under the pension scheme," Indian Bank Chairman KC Chakraborty said.

"Employees have a right to make demands but the world over the shift is towards defined contributions with benefits based on market returns," he added. Employees who had opted for pension get a sum based on 50 per cent of their last drawn salary.

"The next settlement between employees and banks is due in November 2007. I do not see any shift in the status till then," SC Gupta, chairman, PNB, said.

The government and the banks feel that once the Pension Fund Regulatory & Development Authority (PFRDA) Bill is passed, at least for new employees, the move towards defined contribution system would pick up pace.

SBI employees recently got the government to agree to a pension hike after they struck work for a week.