For the 4,000-odd people who retired from the Reserve Bank of India (RBI) before 1997 and are now in their 70s, the new year will not start on a happy note as they will see their pensions reduced from January.
This is because of a government order that RBI has no power to update pension of its employees. This has been a bone of contention between the government and the central bank for the past one year. In 2003, RBI increased the pension of those who retired before 1997 by an administrative circular. The revision was based on pay drawn in 10 months prior to the retirement on a notional basis.
However, in October last year, in an internal circular, the central bank said, “as advised by government of India,” the updated pension scheme is withdrawn with immediate effect.
Protesting the move, the pensioners moved the Bombay High Court, which said they could represent to the government, which could dispose of the representation by a speaking order. The court said if the government order went against the petitioners, RBI would not reduce the pension for eight weeks from the time the speaking order was communicated to the petitioners. The government order, which went against the pensioners, was issued and communicated in the last week of October.
The decision will result in a loss of Rs 1,000-5,600 a month for these former RBI staffers, who are mostly septuagenarians. RBI would have incurred an additional cost of merely Rs 10 crore on updation. The government order said RBI did not have the power to update its pension scheme.
“As per RBI Pension Regulations, 1990, pension is to be calculated on the basis of the average of last 10 months pay drawn and not on the basis of notional pay. Further, there is no provision in the RBI Pension Regulations, 1990, to update pension,” said the finance ministry, adding, “RBI employees have an edge over central government employees on entitlement of gratuity, pay structure, revision of salary. If each service is allowed cherry picking of the best of other services, it will lead to an anarchical situation.”
The finance ministry said RBI’s pay structure was not comparable with that of central government employees for the reason that pay scales of RBI employees were revised after every five years, while for central government employees, the revision happenned after 10 years.
“There are no perquisites for central government employees while RBI employees are entitled to a host of perquisites,” the order said. It added that those who retired from RBI were much better placed than those who had worked for public sector banks as the central bank’s salary structure was much better.
The law ministry, which was consulted by the government, said pension regulations could not be amended through an administrative order but added that the employees of RBI, a statutory body, could not be equated with other central government employees as their pension was governed by regulations under the RBI Act.
The Indian Banks’ Association (IBA), which was consulted, also opposed the hike in pension saying a similar demand could be made on public sector banks. “Updation of pension may involve approximately an amount of Rs 1,042 crore (annually) for public sector banks, excluding the State Bank of India,” the government order said, quoting the IBA.