Will Unions Allow IBA to Divide and Rule in Xth Bipartite Settlement - Old Employees vs New Employees ? Will Unions Allow IBA to set off cost of increased pension against hike in salaries for old employees as had been done in last 4 Bipartite Settlements

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We are reproducing a well researched article by Mr. S K Mishra from Bhopal, sent to us by few of our regular readers. The article has raised many new questions for which we are sure none of the unions are prepared. IBA and Banks have been issuing statements showing concerns about the reduced profitability. Thus, we are sure this time new challenges will be thrown by Government to the union leaders for which they are likely to be ill equipped. Thus, we caution bankers to ensure that the negotiating skills needs to be upgraded by unions with facts and figures or else bankers will have to contend with only marginal increases in the Xth Bipartite Settlement.

Let the following articles be read by each and every union leader and ponder upon as to how to have a fair and just settlement. We at AllBankingSolutions.com will continue to give our opinion and guidance from time to time to the bankers so that maximum transparency is maintained this time in the settlement.

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Dear Friends,

Next Salary Revision of Bank Employees due from 01-11-2012 may now be the subject matter of UFBO & IBA. In last 3 wage revisions DA of 134,151 & 137 Slabs at CPI of 1684, 2288 & 2836 was merged and increase of 12.25%, 13.25% & 17.5% respectively was given to arrive at revised pay scales. In wage revisions the Increased Pension Cost was shown at 26.5%, 28.5% and 36% respectively. Considering 10% as statutory liability of banks, balance increased pension cost was shared between employees and bank. Resultantly the share of employees being at 6.75%, 9.25% and 13% was set- off from the salary increase of the employees. The CPI at present is giving DA of 420 Slabs (Average Annual Increase of 91.25 Slabs in last four years) and by March-2013 the DA slabs may be around 500 with CPI at 4836 that may be the basis for Valuation of Pension Liability in this wage revision. In last wage revision the valuation was done for March-2008, data. One can very easily imagine the magnitude of Increased Cost of Pension in the next wage revision, when DA merger will be of at least 466 slabs as compared to 137 Slabs in last wage revision which showed the increased cost of pension by 36%. Will it be above 50% this time? The employees appointed from 01-04-2010, are not covered by Pension Regulation 1995 as they are under New Pension scheme. So they should not be the party for set off from the increase agreed, for meeting the increased cost of Pension. Many a Petitions filed by CPF optees are pending in courts for such set-off done in last salary revisions. How will it be made workable? Valuation of Pension Liability -

During the year 2010-2011, the Public Sector Banks implemented the second pension option as per 9th Bipartite Settlement and therefore, as on 31-03-2011, the pension liabilities of all these banks increased substantially. As per audited Balance sheets of these 24 PS Banks, the increase in liability was by an amount of Rs.28821.13 crores. The Reserve Bank of India had vide circular No.DBOD.BP.BC.80/21.04.018/2010-11 dated 09-02-2011, permitted all these Banks for amortization of such increased liability in five years. Thus Banks have during 2010-11 booked Rs.8326.59 crores in their P/L accounts and kept balance amount of increased liability to be amortized in next four year. This balance of liability is Rs.20494.54 crores. Here it is worth noting that Net Profits of these 24 PS banks were Rs.34985.98 crores for the year ended 31-03-2011. Had the full liability been accounted for in P/L account, the profits would have been reduced by this amount, which is kept pending for amortization. The details are in annexure –I below. Total employees in these Banks were approx. 525000 as on 31-03-2010, and this is the figure which now onwards will reduce on account of retirements and there will be no entry of employees under the Pension Scheme 1995 as all new appointees from 1-4-2010 will be under New Pension scheme (Contributory @ 10% of BP and DA per Month by employee and equal by Bank). Important –

1. The next Salary Revision due from 1-11-2012 may be with merger of DA of around 466 DA Slabs at CPI of 4700. DA at 69.9% merged and increase in wages if taken at 18% (Almost similar to that in 2007 Revision – it was 17.5%) and assuming that the wage revision will be given effect in year 2015,(As had been the trends) the pension liabilities of 24 P.S. Banks, over next four the years are estimated to be as under-

As On	Liab At.	For Employees		For Pensioners		Total	Increase in	Pension to pay for Yr.		Increased	Increased
March	DA Slabs	Number	Pens. Liab.	Number	For Retd.	Rs. Crs.	Pens. Liab	Amt. Pay	Avg Slabs	Pens.Amt	Pens.Load
2011	333	508888	71391.65	125929	13688.03	85079.68	Over Year	Rs. Crs	For Year	Over 2011	Over Year
2012	420	490723	80919.10	142612	18701.54	99620.64	14540.96	2931.25	361.00	537.15	15078.11
2013	500	470835	84567.50	160811	22869.07	107436.57	7815.93	3560.93	453.33	1166.84	8982.77
2014	580	448559	86335.24	181480	27524.55	113859.79	6423.22	4595.46	533.33	2201.37	8624.59
2015	660	423590	101508.04	204599	32514.48	134022.52	20162.73	6526.59	613.33	4132.50	24295.23

Note - For the year 2015, while calculating the liabilities, the DA Slabs are taken at 194, after merger of 466 Slabs in wage revision with 18% increase in wages, and accordingly revised DA rate taken at 0.085% per slab.

2. In the light of above these 24 Banks are to bear the load of pension costs in next four years as under-

a) Un-amortized amount of 2011 – (Annexure – I below) Rs.20494.54 crores.

b) Increase of Pension Loads for years 2012 to 2014 - Rs.32685.47 crores

c) Increase of Pension Load in March 2015 after Pay Revision - Rs.24295.23 Crores

d) Thus these 24 PS Banks are to bear the Pension Load – Total- RS.77475.24 crores by March -2015.

e) Besides above the banks will have to pay the arrears of Salary Increase for the period from 1-11-2012 to March -2015 also.

3. In above situations the Next Wage Revision coupled with Pension Updating is going to be a difficult task for UFBU, as the profit of these 24 Banks were Rs.34985.98 crores for year 2011 and may be around Rs.160000 crores for next four years. This will be the main argument of Banks, IBA and GOI against any such further increase of liability on these Banks. Thus employees’ associations will have to be ready with ample home –work, while discussing and negotiating with IBA. The costs incurred or possible revenues that are not coming to Banks for discharging socio-economic responsibilities such as - Pension Payments through Banks, Funds blocked in Debt Reliefs, Lower Interest Rates on some sectors, financial inclusions etc. do have the bearing on profits of the Banks. Thus net profit should not be the only criteria for salary increase or Pension updating. The role of the P.S. Sector Banks in building the economy of the country, and comparable salary structures with central government employees must form the basis for Pay Revisions.

ANNEXURE-I

Amt In Rs.Crores	Pens. Liab., Increase & Pending Amortisation-2011
Name of Bank	Valued	Increase	Booked	Pending	Profit
	Pen Liab.	In Liab.	In P/L A/c	Amortization	2011
Allahabad Bank	2578.78	747.70	149.54	598.16	1423.11
Andhra Bank	2084.06	865.35	358.70	506.65	1267.08
Bank of Baroda	6645.04	1829.90	365.98	1463.92	4241.68
Bank of India	6892.06	3323.65	664.73	2658.92	2488.71
Bank of Maharashtra	2156.79	512.38	102.48	409.90	330.39
Canara Bank	7175.38	3054.27	1027.79	2026.48	4025.89
Central Bank of India	5997.12	2046.53	865.00	1181.53	1252.41
Corporation Bank	1671.90	630.63	188.61	442.02	1413.27
Dena Bank	1007.03	551.52	204.41	347.11	611.63
Indian Bank	3563.00	1127.60	344.18	783.42	1714.07
Indian Overseas Bank	3863.32	804.17	197.25	606.92	1072.54
Oriental Bank of Commerce	2509.83	1142.91	459.31	683.60	1502.87
Punjab & Sind Bank	2350.23	951.59	190.32	761.27	526.17
Punjab National Bank	10590.72	2641.11	528.22	2112.89	4433.5
State Bank of Bikaner & Jaipur	1913.19	384.45	76.89	307.56	550.88
State Bank of Hyderabad	1719.94	362.42	73.00	289.42	1166.24
State Bank of Mysore	1232.79	577.26	115.45	461.81	500.62
State Bank of Patiala	1895.87	808.99	161.80	647.19	652.96
State Bank of Travancore	1434.91	671.91	134.38	537.53	727.73
Syndicate Bank	5701.55	1090.90	509.38	581.52	1047.95
UCO Bank	3066.66	1262.19	621.91	640.28	906.54
Union Bank of India	4771.82	2390.86	778.69	1612.17	2081.95
United Bank of India	1861.99	447.31	89.46	357.85	523.97
Vijaya Bank	1832.94	595.53	119.11	476.42	523.82
Total	84516.92	28821.13	8326.59	20494.54	34985.98

Note - Figures are from Audited Balance sheets of Banks as of 31-3-3011, excluding SBM. Its Audit Report for 2011 is not on its site therefore figures of SBM are taken in line with SBT.

S.K.MISHRA – BHOPAL - 29-03-2012