The Woeful Trial Of Bank Pensioners

Moin Qazi

Public banks have played a historically stellar role in financial inclusion and the development of the underserved sector. These banks have been the backbone of the government’s socio-economic agenda. State-owned banks in developing countries have to shoulder the main burden of the government’s development policies—from rural lending to infrastructure development.

But while public banks   have striven ceaselessly to bring about an economic revolution that is visible in so many improved development indices, the staff have been getting a raw deal. The government has been consistently extolling them for their commitment and zeal in translating the development agenda, but has paid little heed to their worsening service conditions. While there have been paltry raises in salaries of staff, there has been virtual stagnation in pensions for over two decades particularly when inflation has been soaring. Salaries in public banks have been far less attractive than in private banks. The only consolation is the provision of pension which 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.

There may have been some black sheep in the industry which has tarnished the image of banks, but the entire fraternity must not be made to suffer for their misdeeds. The central and state governments have also been plagued by periodical scams and many unholy acts but that has never detracted us from the wonderful work of outstanding civil servants who form the bulwark of India’s adorable public administration. So is the case with the public banking sector. The staff form the bulwark of India’s robust financial administration and have always delivered on all government policies and programmes. In the absence of competitive salaries, the only tool for keeping their morale intact is by doing justice to their wage and pension package. It must be commensurate with both the volume of work and the grave risks involved in their operational roles.

Salaries, leaves and other service conditions of public sector bank employees and officers are decided by bilateral agreements once every five years. But pension does not form part of this contractual arrangement. Unlike in the case of government employees, the pension of bank retirees is not updated in line with periodical revision of salaries. Thus, the lowest grade government pensioner gets a proportional raise at every wage revision which is not so in the banking sector. In the banking sector, the retired top-grade executive has to make do with a fixed pension throughout his entire life. He may have been at the helm of affairs of a large bank, but he cannot maintain even a semblance of the living standard that was extended to him by virtue of his official position. This is certainly a highly unique form of injustice and the concerned authorities don’t appear to be in any mood to address this serious miscarriage of justice.  It has become an insidious tool for humiliating so many talented men and women, with impeccable and unblemished careers, who steered their banks with such astute leadership. Their achievement speaks of their contribution. And, sadly they find a pittance in store for them in the autumn of their life. In fact, the government is so magnanimous with its pensioners that it gives a few percentage points increase for pensioners who have completed 75 years of age. This is further enhanced in other higher age bands. All this logic is lost when the rules for bank pensioners are   laid out.

It is a well-known fact that the government’s socio-economic programmes have to make extensive use of banking conduit. It was public banks that revolutionised rural India in the social banking era of the 1970s. These banks are the one-stop shop for all financial needs of the local rural populace, including insurance, financial literacy, remittance and receipt of welfare subsidies and grants, amongst others.

The depth and outreach of the banking network in the late seventies grew at a sizzling pace on account of the enthusiastic embracement by banks of tough social and economic mandates of the government. This was at a time when the communication infrastructure in the country was abysmally weak, unlike today when mobile phones, email, SMS, Skype and zoom enable you to communicate anywhere any time.

One of the reasons adduced for ignoring the claim of bank staff for commensurate wages is India’s pile of soured loans. This bad loan crisis is only partly of the making of bankers. One must not forget that it is a classic example of how powerful and politically influential tycoons have been undermining financial norms and bank regulations to secure credit and then default on it. The huge   desperate attempts by governments to detoxify balance sheets shows how critical the crisis has become. When borrowers become insolvent, their loans are added to an existing mountain of debt. Each time it happens, banks have to make heavy write-downs, ploughing the dud loans like rotten potatoes, ultimately choking the credit line. But why bank staff should be penalised. There are separate forums which are already dealing with malfeasance of individual staff. But by such actions we are strangling the morale of staff who are driving India’s socioeconomic revolution even in the face of a pandemic like Covid-19. We all know the huge casualties public banks suffered during demonetisation.

Most big defaulters have the money to employ legal eagles who can play the judicial system—it is here where the law flounders. India has some of the most draconian laws in books, which are ineffective against powerful dodgers. We keep producing new laws when the existing ones are adequate and just need more teeth to obtain results. We show such promptness in condemning waivers for poor farmers, but we lack the courage to tame the big fishes because they have enormous clout. Politicians are equally guilty of undermining the integrity of banks. They stack the decks with populist sops using banks as spigots for burnishing their election credentials.

A moot point is that the government is ready to shoulder the additional financial burden on account of the pension revision its employees out of the revenue income, whereas banks are required to meet this liability from their profits from commercial operations. in the case of bank pensioners 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 Funds comprise the EPF contributions which were payable every month as a component of salary to employees and deferred and detained by banks in trust for payment of pension. In the case of State Bank of India, the trustees of its Pension Fund have traditionally built an enormous corpus for meeting the pension obligations, and it is comfortably adequate to meet pension liabilities for a long future.

In public banks, the pension structure was premised exactly on the principles that were applied to Reserve Bank of India. In compliance with clause 6 and 12 the Memorandum of Settlement dated 29.10.1993 between Indian Banks’ Association and All India Bank Employees Association entered into under Industrial Disputes Act, it was specified   that the amount of pension and general conditions of pension scheme in banks shall be on the lines of the RBI Pension Scheme.

The government had at one stage refused to give in to the RBI employees’ demand for revision of pension on the lines of   government employees, pleading it would have a contingent effect, which would lead to similar demands from other public sector banks.  The financial burden of updating pension in the RBI was Rs 858 crore while the apex bank’s pension corpus was around Rs 12,000 crore. The government finally agreed because the logic was on the side of RBI employees. RBI pensioners became entitled to receive a notional rise of 10% 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 payment of   pensions. But the government has not shown the same consideration. May be, the RBI clout was too strong to be overlooked.

With the government having shown both wisdom and prudence in revising the salaries of staff of RBI, one hopes it will follow suit with staff of public banks. They deserve this long-awaited recognition and acknowledgment particularly because their work involves physical and mental discomfort as well as great risks.

Behind the gleaming images of successful development revolutions is the untold saga of   grassroots staff of banks and development agencies. Development work is dirty; you have to soil your hands, and you have to live with tough elements at the lower dregs of society. Business schools don’t teach you how to fight goons; risk mitigation can’t hold water in the face of the mad frenzy of public assaults; technological gadgets can’t speak the language needed to navigate this dense thicket of vandalism. These tiny revolutions may not command great attention; but in merit, they 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 the talk of money buying talent but not a commitment, the development and 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 banking sector if it did not secure their future financially.