Letter to Finance Minister 17 04 2006

C N Venugopalan Ex- Manager, Union Bank of India & Co-ordinator of PF Stream Bank Staff	“ Nandanam” Kesari Junction North Paravoor Kerala – 683 513
Phone No. 0484 2447994 Mobile: 9447747994

The Hon’ble Minister for Finance, Government of India, Ministry of Finance, New Delhi

17th April,2006

Dear Sir,

Denial of Pension Option and Pension to a segment of Bank Employees and Granting of Pension enhancement to State Bank of India employees – Discrimination and injustice involved

I invite your kind attention to my petition dated 20^th June, 2005 and a subsequent follow up letter dated 15^th December, 2005 in the matter of Union Bank of India, a public sector bank not extending me the benefit of pension through a fresh option for Pension that is legally to be extended to me. I note with much regret that the Government has neither acknowledged my letters nor given me any information regarding the disposal of the petitions. Copies of both the petitions are enclosed to facilitate quick reference. The details may kindly be kept on record so that I can obtain the status information / action taken report from the CPIO under the Information Act, 2005.

I inform in this connection that a new threat of strike is looming large in the banking industry with the sanction of enhancement of Pension in State Bank of India (“SBI” for short), which is a third retirement benefit in SBI in the context of a majority of the remaining bank employees not given Pension even as a second retirement benefit in lieu of Contributory Provident Fund. It is a matter to be known whether the employees of SBI enjoy any backward status so as to get three retirement benefits in sharp contrast with the employees of other commercial banks who are granted only two retirement benefits.

The understandings reached at the meeting of the Minister of Finance along with the officials of the Ministry with the management and staff of State Bank of India reportedly “in furtherance protecting public interest” for granting revision in Pension which is a third retirement benefit becomes a gesture of gross discrimination to the remaining employees in the industry, both serving and retired. The Government has bowed before the militancy and force of the striking employees and granted them about 250 percent of rise in the Pension, which is a third retirement benefit in addition to Gratuity and Contributory Provident Fund to SBI staff. The employees of other Public Sector Banks and Private Banks in India enjoy only two retirements benefits viz. (i) Gratuity and (2) either Contributory Provident Fund or Pension. Pension is not given to all employees alike. A good percentage of employees are forcefully retained in PF segment by illegally denying them a chance to exercise option for Pension. Under such circumstances, the understanding arrived at in the meeting on 9^th April, 2006 is discriminatory and unconstitutional involving infringement of fundamental rights enshrined in the Constitution. The government that has a responsibility to extend uniform compensation package to workmen doing the same work has now shown a partisan attitude in favour of SBI staff and enhanced the gap in the pay packets of SBI vis-à-vis that of other staff in Banking Industry. Creation of two segments of employees among workmen doing the same work is a gross injustice; quite opposed to the statute of the country as Equal Pay for Equal Work is the dictum to be followed.

SBI was a continuity of the Imperial Bank of India where Pension Benefit to employees existed. However, all the employees of the Imperial Bank retired. Though none of the present staff are in any way related to the erstwhile institution, the might of the SBI staff ensured continuance of Pension Scheme in SBI. Thus the employees of SBI enjoy Pension as third retirement benefit in addition to Contributory PF and Gratuity. Wonderfully, “to bring about parity with the other Bank Staff and their Pension Scheme”, they put up a demand for enhancement in Pension Rate and the Government granted their demand by granting 250 percent rise in the Pensions.

About 50 percent of the remaining employees in the Banking Industry in Public Sector and Private Sector are not given eligibility to Pension even as a second benefit. They are arbitrarily, illegally and forcefully detained in Provident Fund Segment by not allowing them to opt for Pension. In 1995, they were asked to exercise an option either in favour of Pension Scheme or to continue in PF stream. While extending the Option, the Pension Regulations of Banks contained a clause to the effect that participation in strike even for a single day would enable the Managements to forfeit past services of an employee. Joining the Pension Scheme entailed immediate lapse of the Contributory PF so far an employee has gained into the Pension Fund of the Banks. Moreover, forfeiture of past service for participation in strike would result in want of qualifying service to be eligible for Pension. In view of the twin disadvantages of losing CPF and Pension, many employees could not opt for Pension. The forfeiture of service clause was later scrapped from the Pension Regulations in the year 1999. But the Bank Managements are not fulfilling the legal onus on their part to extend fresh Pension Option to those who could not opt for Pension on account of the existence of the deleted clause in the Pension Regulations by extending a fresh chance of option.

Payment of Pension – a mandatory requirement.

I further bring to your kind attention the following decision of the Constitution Bench of the Supreme Court that makes payment of Pension mandatory for employees:

Constitution Bench of Supreme Court in Nakara Case (17 12 2002).

“Pension is neither a bounty nor a matter of grace depending upon the sweet will of the employer and it creates a vested right which is statutory in character because the Pension Rules 1972 are enacted in exercise of the power conferred by the proviso to Article 309 and clause (5) of Article 148 of the Constitution”.

“That pension is not an ex gratia payment but it is a payment for past services rendered”

“It is a social welfare measure rendering socio-economic justice to those who in the hey day of their lives carelessly toiled for the employer on an assurance that in their old age they would not be left in the lurch. The pension payable to a government servant is earned by rendering long and efficient service and therefore can be said to be a deferred payment or the compensation for service rendered”.

“Pension is not a charity doled out to the retired employees, but it is their legitimate and inalienable right earned by the sweat of their brows”.

In view of the above decision, banks do have a statutory liability to extend the benefit of pension to all the employees. Pension is a legitimate establishment expense that the employer has to meet invariably.

The specific grounds entitling the employee to a fresh option in favour of Pension Scheme are enumerated in detail in the petition dated 20 06 2005 submitted to the Hon’ ble Minister (Copy enclosed).

Significant Accounting Policies.

Banks being financial institutions, have to prepare the correct working results that have to be published for the information of the Public. Significant accounting policies make it imperative that Banks make adequate provision for meeting all legitimate establishment expenses for determining the actual profits. Unless and until adequate provision is made in respect of the Pension obligation which is a legitimate establishment expense, the profits reflected in the Balance Sheets would be unduly inflated ones. Distribution of such inflated profits as dividends would be quite inappropriate. In the process, the amount payable as Pension to retired employees and the funds to be transferred to Pension Fund (representing future employers’ PF contribution in respect of the employees on the rolls of the Bank at the time of commissioning the Pension Scheme) are also treated as part of the Profits and distributed to shareholders as dividend. It tantamount to an action analogical to robbing Peter to pay Paul.

Cost aspect and Pension

Extension of fresh option is something, which Banks can do without incurring any additional costs. The financial obligations can well be met without incurring any extra expenditure than the committed costs at the time of commissioning the Pension Scheme in the year 1995 for the following reasons:

1. At the time of commissioning Pension Scheme, Banks had the liability to make PF Contributions in respect of all employees on the rolls in 1995 till their retirement. This was an already committed cost. Such contributions should, notionally be worked out and ploughed back into the Pension Fund to augment it. There is a backlog of about one decade. The amount will work out to Rs.10, 000 Crores to Rs.20, 000 Crores.

2. The balances available in the PF accounts of the present PF stream employees who may opt for Pension through fresh Pension Option which will be in the range of Rs. 2.5 lakhs to Rs. 5.00 lakhs. This can augment the Pension Fund of Public Sector Banks by about Rs.50, 000 to Rs.60, 000 Crores on a rough estimate. This amount along with the future contributions in respect of such employees till their retirement (which was also a committed cost of the Banks at the time of commissioning the Pension Scheme) should also be made available for augmenting the Pension Fund in all fairness.

3. In respect of those who are recruited after inception of Pension Scheme whom the Pension Scheme compulsorily encompasses also, keeping the pay package at the same level, the contributions should be made into the Pension Fund. This also involves no additional cost since Banks had an obligation to make contributions in respect of such employees as per the provisions existing in 1995.

4. The exercise pertaining to the above three items have to be carried out for the past one decade and transferred into the Pension Fund.

5. Judicious investment of the Pension Fund running several Crores or a portion of it in Mutual Funds will ensure substantial returns that will augment the Pension Fund substantially. This will be an additional opportunity for Fund managing Banks like SBI, PNB, Canara Bank LIC, UTI etc.

6. All the employees who opt for Pension are not going to retire in a lot and create a Pension Obligation for the Banks and the liability will be growing only in a phased manner. On account of death and other cessation of Pension of the present pensioners, cessation of family Pension, the liability will be getting extinguished in several cases and some sort of balancing will be available in the process.

7. A fresh Option will ultimately result in substantial establishment expenditure as it may induce a number of employees to quit the present jobs with a less attractive compensation package.

8. Option to remain in PF in other words should be retained as a terminal benefit to only those who need it for some personal reasons or to those who will not have qualifying service to be eligible for Pension.

Financial Constraints –an illusion

It was true that some of the Banks like Syndicate Bank, UCO Bank Indian Bank etc were ailing ones a decade back. All of them have turned corner and some have shown fantastic working results. Want of paying capacity is a fictitious thing. Banks shed several Crores through write off and relief to defaulters in circumstances that are not genuine in many a case. FM has apprised the Parliament that Rs.16, 582 Crores was written off during the past three years as Bad Debts. Ground rules and code of ethics for securing business business are forgotten altogether. Banks competing with each other, take over advance accounts from others by offering lesser and lesser rates and apply cosmetics to the performance of the key men. The banking barons drain out the vital fluid of the Banking Industry in plenty of Crores of Rupees every year through take over of Loan accounts at reduced interest rates from other Banks. Performance should invariably be gauged with level playing ground given. Securing business by giving interest concession is totally absurd. On one side Banks join hands together by sharing ATMs and establish common service network to reduce operating costs. The other side they pull the legs of one another by unscrupulously giving interest concessions to big borrowers. The customers who have bargaining power gain and the amounts they gain represent loss of vital fluid of the industry. The deregulated rates of interest further offer scope for corruption and nepotism. The deserving poor never get a fair treatment. The big industrialists flourish and their workmen also get all good perquisites. The banks which finance in furtherance of such industries claim want of capacity for paying Pension to the staff who toiled through and through for their organizations. This is the sad situation. The amounts payable to them by way of establishment expenses are denied. The benefit is accruing to the key men heading the different Banks who are able to show higher volume of business. The interest rates have been deregulated. RBI and the Government do not impose the required control and they simply sit enjoy the game like watching a Cricket.

We are also aware, several Banks including a PSB viz. New Bank of India monitored by RBI and controlled by stalwarts in the industry vanished into obscurity. Paravoor Central Bank Ltd., Nedungadi Bank, Bank of Madura etc. are some of them. Proper control was wanting. Key men heading such banks had no integrity too. Banking industry has provision to contain the gigantic losses arising out of manipulations and mismanagement and the entire staff burden is shifted to some other Bank. There is however no money to provide a living to those who toiled and sacrificed their entire career for the organizations and made them what they are now. One has naturally to think how Banks would have met the Pension obligation, had all the employees opted for it at the time when the offer of Pension was made. Pension is invariably not a consideration for an option letter given, it is the consideration for service rendered to the organization and a deferred wage payment as underlined by the Constitution Bench of the Supreme Court in the Nakara Case.

All the foregoing will testify that extension of fresh Pension Option and payment of Pension to the serving and retired employees are mandatory requirements and have to be considered expeditiously to do away with constitutional violation and infringement of fundamental rights. The matter may please be examined from legal angle as also from social angle and Banks may be asked to expeditiously extend Pension Option to the staff who seeks it. In view of the extension of Pension as a third benefit in SBI, it may also be considered as a third benefit in other Banks also by paying Pension along with the Contributory Provident Fund benefit for ensuring industrial parity, justice and fair play.

The strike in SBI for six days from 03 04 2006 to 08 04 2006 over the Pension issue resulted in untold sufferings to the general public. Impending similar action in other banks to secure their right to Pension also may cause extreme hardships to the community. Hence I earnestly request you to settle the Pension Issue in other Public Sector Banks in an expeditious and befitting way to avoid labour unrest.

As Convener of the PF stream employees in Banks, I intend to move a Public Interest Litigation Pension in the Apex Court for getting the issue redressed and for averting the possible inconvenience that may be occasioned to the public as the Trade Unions in other Commercial Banks may follow suit as in SBI. As a pre requisite for exhausting all remedies before it, this representation is submitted

I further request that the receipt of this letter may please be acknowledged and action initiated on it may be kept ready with the CPIO from whom I can obtain requisite information under the Information Act, 2005 and submit to Court, should situation arise.

Thanking You,

Yours faithfully,

C N Venugopalan