Pension Burden - 30 percent Recovery from Wage Hike

C N Venugopalan
Ex- Manager, Union Bank of India
“ Nandanam”
Kesari Junction
North Paravoor
Kerala – 683 513
Phone No. 0484 2447994 Mobile: 9447747994
No. 20091207 07th December, 2009

Smt. Jayanthi Natarajan,
Member of the Parliament and Chairperson, Grievances Committee,
Government of India, New Delhi

Madam,

Pension Option and Wage Pact in Banks

I am extremely glad to know that as a result of the key role you played, IBA and UFBU concluded the captioned items. Thank you for everything on behalf of the retired employees and on my personal behalf.

I thought it worthwhile to bring to your information the following points in the context of the IBA making the employees share 30 percent of the Pension burden out of the wage hike sanctioned:

Eighteen listed Public Sector Banks in India (excepting banks that are not listed) showed the below mentioned profits during the past five years:

March March March March March Rs. Crores
2005 2006 2007 2008 2009
Punjab National Bank 2707.21 2874.77 3230.64 4006.24 5744.35
Bank of India 340.05 701.44 1123.17 2009.40 3007.35
Union Bank of India 719.06 675.16 845.39 1387.03 1726.55
Central Bank of India 357.41 257.42 498.01 550.16 571.24
Canara Bank 1109.51 1343.22 1420.81 1565.01 2072.42
Indian Overseas Bank 651.36 783.34 1008.43 1202.34 1325.79
UCO Bank 345.65 196.65 316.10 412.16 557.72
Syndicate Bank 402.90 536.50 716.05 848.06 912.82
Allahabad Bank 541.79 706.13 750.14 974.74 768.60
Vijaya Bank 380.57 126.88 331.34 361.28 262.48
Bank of Maharashtra 177.12 50.79 271.84 328.39 375.17
Corporation Bank 402.16 444.46 536.15 734.99 892.77
Indian Bank 408.49 504.48 759.77 1008.74 1245.32
Dena Bank 61.00 72.99 201.56 359.79 422.66
Bank of Baroda 676.84 826.96 1026.47 1435.52 2227.20
Andhra bank 520.10 485.50 537.90 575.57 653.05
Oriental Bank of Commerce 760.81 803.16 826.81 840.94 905.42
Total
10562.03 11389.85 14400.58 18600.36 23670.91
Profit above March 2006 level (Incremental Profit)
3010.73 7210.51 12281.06
Total Profit hike for all the three years 22502.30

Even as they made incremental profits of Rs.22, 502 Crores + (data for 2 Nationalised banks and six subsidiaries of SBI not included) over the March 2006 IBA has made employees to share a burden of Rs.1800 Crores towards Pension. During the past three years the loan waiver by banks was to the extent of Rs.25,000 Crores which was in addition to the Agricultural waiver of Rs.60,000 Crores. While they could easily accommodate Rs.85000 Crores on write off, banks were pleading paucity of funds to meet the Pension burden in spite of the progressive and cumulative Net Profit figures.

During 2002 -2006 period public sector banks standing under the common umbrella of IBA were competing with and pulling the legs of one another sans any business ethics. They were caught with “take over mania” and snatched away big loan accounts from counterparts using the lethal weapon of interest rate, offering concessions to big and potential people in the deregulated interest regime RBI permitted. The exercise was to add to the cosmetics of the key men by broadening the lending base. RBI remained cool as if it was watching a cricket game and the life blood of banks oozed out like anything. Key men who drew large emoluments and perks and whose responsibility it was to strengthen banks were debilitating them. History tells that in spite of the close surveillance of banks by RBI keeping its men as directors on bank boards, even a public sector bank viz. New Bank of India vanished into obscurity. RBI emerged into the picture only when a catastrophe arose, merged that entity with some strong bank, saved its face and went back to the barrack.

When I mooted vehement criticisms to RBI, MOF etc., against the undesirable tendency that damaged the banking system, the interest concessions were abolished to a great extent in August, 2006 and it is after this period all banks in India started making progressive profits. A major portion of the cumulative profits of Rs.22502-30 Crores can rightly be attributed to my work done remaining outside the banking system for no compensation. I am also denied the Pension Payable to me on my Voluntary Retirement from Union Bank of India on 20th April, 2001 in spite of the yeoman services done extraordinary contribution subsequently made to banking system.

The ninth bipartite settlement encompassing the Pension Option is totally a ridiculous thing. All employees on rolls of the banks in 1995 are entitled to a fresh option and it is a legally vested and already sanctioned item. In 1995 the Government sanctioned Pension Scheme ( adopted by boards of Banks too) was offered keeping therein a draconian clause to the effect that if any employee participated in a strike banks could forfeit his entire past service. Joining Pension scheme through exercising an option within the set time frame entailed surrender to the Bank’s Pension Fund the entire CPF (employer’s share) standing to his credit and one had to secure a minimum qualifying service of 20 years to be eligible for Pension. It meant that in case the bank forfeited the entire past services of an employee and he fails to secure 20 years’ service afterwards, he would lose the existing benefit of CPF as also Pension. This prevented majority of employees from opting for Pension.

When the aforesaid penal clause was deleted from the Pension Regulations on 27th February, 1999, banks did not extend a chance of fresh option to those who could not opt for it because of the presence of the deleted clause earlier. Moreover, they kept the information in camera without reaching the employees by giving mere gazette publication of the amendment, in total deviation of the normal practice of circulating all amendments among employees beforehand. The amendment vested with each employee on rolls of banks in 1995 a right to Pension Option afresh which banks illegally denied. Neither the Unions nor the Directors representing employees demand and obtain the vested right.

Before publishing the Government sanctioned final Scheme, a draft was published earlier which too had called for options within a time frame. Several employees who opted in terms thereof wanted to take exit when the clause providing for forfeiture of service was infused into Final Regulations. After publishing Final Regulations, banks came with an offer permitting any one (who opted in response to draft Regulations) to take exit from the scheme by submitting his request. This they did upon mere advice from the IBA which had no authority exceeding that of the Board of the Bank or the Government which sanctioned the scheme. Banks revoked the options of several employees in spite of the fact that the Regulations contained no procedure or provision for revocation of an exercised option and both the draft as also the final Regulations stated that “an option, once exercised shall be final and irrevocable”. The revocation banks contemplated is thus illegal and void. I am not paid Pension though the option I exercised on 30 09 1994 is of a final character.

Trade Unions that regularly raised tolls from members failed to protect the legally vested rights of the employees. Banks pleaded inability to pay the legitimate establishment expenditure which courts had stated as an inalienable right of the employee akin to fundamental rights of a citizen earned through relentless service and not as a charity doled out to the retired employee at the sweet will of the employer. Banks which originated and function entirely on the premises of some law or other were showing utter disregard to the rules and regulations they themselves framed. Can any banker say what banks would have done if every one had opted for Pension when initially offered? They had money to spend extravagantly but they lacked funds to meet genuine establishment expenditure legally payable. Unions aided and abetted the process without claiming the already sanctioned and legally vested social security benefit of members.

Those retired during the period from 1995 to date without Pension Option were stranded in life and Unions drove them to Courts. In 2001, the three judge bench of SC rejected intervention and turned down the appeals, closing the matter. Government had also categorically stated that fresh option would not be granted. The Unions differed among themselves and surrendered the rights of employees. Those who initially advised all employees to opt for Pension when the scheme was commissioned wanted to make sure that their rivals who said that CPF would be beneficial never get a chance to opt again. The latter stuck to their stand that they were right in recommending CPF even on knowing facts to be otherwise. They went like parallel lines that would never meet. Pension Option vanished from the agenda or demand list of all Unions and their agitation programs for years together and it became a stale one by 2001. Ultimately in December, 2005, Unions agreed with IBA during the course of 8th Bipartite settlement not to open the issue again, thereby selling out the cardinal rights of the employees for ever. A fresh option for Pension became a shattered dream of the bank employees.

Right from 2001 April, I had taken up the matter with several authorities but with no avail. On 1st April, 2003, I had filed a petition nearly three years (not heard even now). Knowing that Court would not be of assistance to the victims, I issued an all India Circular among bank employees stating how and why they were entitled to fresh option and showing the inertia of the Unions in the matter. Thousands of e-mails were sent to different bank offices and ultimately the Unions had no alternative other than to perform on it. This is how Pension Option once again figured in the agenda of agitations and ultimately became a reality.

When three or four agitations took place there arose a MOU on 25th February, 2008 between IBA and UFBU to logically conclude the item within three months from then. Three months, six months, nine months, twelve months and fifteen months passed by on account of lack of interest of Unions. Ultimately the item got mixed up with wage revision giving the banks a chance for making a foul bargain on pay hike in the name of the Pension liability. Pension was an already sanctioned benefit to be extended pursuant to Pension Regulations and not in any way related to wage agreement. The sharing formula of 70:30 by banks and employees (out of proposed wage hike) is also illogical since those retired under VRS as also on superannuation from the Pension segment are already paid regular pension without any contribution. The sharing formula has no legal backing and is an arbitrary and illegal step. Pension is expenditure to be borne by employer and not by employee.

Though Unions differed among themselves and joined hands with bank to deny the legitimate right of the employees for about one and a half decade and put all retired to extreme hardship, both schools of thought are now competing with each to say that each of them redeemed the lost right. In fact they remained non-performing on it and made serious lapses all along. The letters of appreciation I received from people who are not personally known to me testify that my relentless work on the issue for eight years and finally using the unions as my weapon to fight against the IBA has given solace to lakhs of bank men. The banking system is benefited substantially through the huge profits it could make as a result of my work and gets sheen through eradication of the injustice it perpetrated on its work force. Unions also can have a face lift to some extent since they worked for and secured the right for the members though through my prodding and propelling. If they are seasoned and responsible people, they should tender apologies to the members and the retired bank men for having leashed their right for about a decade.

I make an earnest appeal to you to please interfere in the matter and to take up with IBA to settle the Pension Option issue in a befitting manner by giving up the sharing formula and by granting pension option and arrears to all employees including the VRS retirees who are legally entitled to it.

Thanks and Regards,

Yours faithfully,


C N Venugopalan