Letter to Mr. K K Nair

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

An Open letter to Shri K K Nair

Mr. K K Nair, 23^rd July, 2006

General Secretary,

BOB Officers’ Association,

3 Walchand Hirachand Marg,

Ballard Peer,

Mumbai 400 001

Dear Comrade,

I am astonished to find from a Circular Letter I happened to see that you have pacified your members with an assurance that in the matter of 2^nd Option for Pension, IBA is conducting viability studies for granting 2^nd Option of Pension ( as a second retirement benefit) . This is at a juncture when pension enhancement has been approved in SBI as a third benefit so as to bring about parity with the Pension benefit extended in other Commercial Banks (Unquote- “where Pension is not available uniformly to all even as a second benefit”).

While dwelling upon any alternative proposal on grounds of fund constraints, we have to first think as to what Banks would have done if every one was to opt for Pension when the offer was made originally in 1995? How the Banks would have met the expenditure then?

As of 1995, banks had a liability to contribute to the PF of each and every employee on their rolls till the time of their actual retirement. In respect of those who joined the Pension Scheme in 1995, they stopped such contributions to the PF Accounts (which amounts should be notionally worked out in respect of each employee and ploughed back into Pension Corpus every year). The exercise could have been done without any additional costs than the original committed establishment costs. With 2^nd Option for Pension, the Pension Fund would get augmented top the extent of Rs.4.00 lakhs to Rs.6.00 lakhs in respect of each staff. The CPF contribution in respect of such employees too for their residual services can also be shifted to the Pension Corpus. The Banks can very well contribute 10 percent of the Basic Pay of all fresh recruits also, who are encompassed compulsorily under Pension Scheme from the year 1995, without incurring any additional establishment costs. Then there are absolutely no fund constraints for banks for meeting the Pension expenditure. The Corpus will always have a surplus since all employees are not going to retire the very next day after entry to Pension Scheme. Retirement is a gradual process and no catastrophe will arise.

We are aware that Banks themselves were not knowing what they were doing while implementing the Pension Scheme. They made it compulsory that all fresh recruits are to be included in Pension Scheme. This very vividly shows that managements were also under an impression that the Pension Scheme would be less expensive. If experts thought like this, what about the laymen? The real absurdity is that the freshers are extended Pension Benefit for no contribution or sacrifice from their side (like surrender of CPF balance) whereas those who toiled for their institutions and made them what they are now are denied entry to Pension scheme even against surrender of their existing CPF Balance running into Rs.4.00 lakhs to Rs.6.00 lakhs.

In a country where the legislator who sits for a term and subsequently deprecated and discarded by the electorate gets a Pension, there is no justification in denying the Pension Benefit to a bank employee who contributed his whole effective life at the altar of the institution he worked. In banks, managements asked the employee to exercise the option for Pension, keeping in the Pension Regulations a clause enabling them to forfeit past services for participation in strike. Joining the Pension Scheme entailed surrender of then available CPF balance of the employee to Pension Fund. Moreover, the employee may not get Pension for want of residual qualifying service if the management any time forfeited his past service for participation in strike. This was the sole reason why many a staff did not join the Pension Scheme. When the forfeiture of service clause was scrapped in February, 1999, Banks had the legal liability of giving fresh option to those who did not join Pension Scheme on account of the existence of the deleted clause in the Regulations. Banks moreover kept the information out of the reach of the employees by merely publishing it in the Gazette of India against the usual practice of issuing appropriate staff circular regarding the amendment stating that the amendment will have effect from the date it is published in the official gazette. Trade Unions also forgot the matter of securing the fresh option chance, which was the basic purpose of the deletion of the clause. The right to fresh option is a legal right, which the managements should never get absolved of the liability even if they give any alternative benefit. The option given to RBI employees in 2000 is also a reason that makes fresh option mandatory for other banks also.

Pension Scheme along with the CPF Scheme resulted in the creation of two segments of people with entirely two compensation packages among people doing the same work. This is highly opposed to right to equality enshrined as fundamental rights of citizens enshrined in the constitution. Moreover Constitution bench of the Apex Court has given verdicts to the effect that Pension is an inalienable right of a government servant and not a charity doled out to him at the sweet will of the management.

Banks have funds to drain out by granting advances at reduced rates competing with each other to facilitate business promotion by way of cosmetics to some 50 to 80 key men. The vital fluid oozing out in crores is of the banking system. The beneficiaries are affluent people with bargaining power. Deserving poor gets nothing. Scope for corruption is additional. Banks have money to waste several crores of rupees every year just for adding cosmetics to the performance of the key men. The prodigal banking barons do not have money to pay Pension only. RBI never interferes unless and until a catastrophe arises and watches the game enjoying it like seeing a cricket. We have seen that even big banks in Public Sector like New Bank of India vanished into obscurity and got merged with PNB, thanks to the close surveillance and monitoring of RBI.

Significant accounting policies make it mandatory that all legitimate establishment expenses are to be provided for and the residue after meeting them is the real profit that can be distributed as dividend. Now, since Pension expenditure is not met adequately especially in the context of the legal lacunae in not extending 2^nd option and the ruling of the Apex Court in other cases, profits are inflated unduly and pension payable to retired employees is distributed as dividends. Banks are robbing Peter to pay to Paul. The matter is taken up with the Institute of Chartered Accountants with a request to make appropriate qualified Audit reports. SEBI has also been approached since profits are inflated and stock prices have been hiked to the disadvantage of investors. The Company Law Board is informed since the Balance Sheets published are inconsistent with the law and fail to reflect a true and fair financial position of the banking company concerned.

With the hike in Pension Rates in SBI with the April, 2006 strike, SBI employees got Pension as a third benefit without any option. The people who are doing the same work in other banks do not have Pension even as a second benefit uniformly since many are still in CPF segment. The Finance Minister whose spouse is reportedly the counsel of some SBI Trade Unions was granting parity in Pension to them with the Pension benefit available in other banks (which was illusory since all do not have Pension benefit in other banks). The Pension hike in SBI is a solid ground for claiming Pension as a third benefit in other banks. The question of an alternative scheme or proposal for granting it in other banks is a shame to every one concerned. The need of the hour is to seek it as a third benefit allowing banks to settle CPF through bonds or some other instruments.

It is a plight that in spite of the illegality involved in all the matters, trade unions are not coming out to fight the injustice banks meted out to the members and to establish fairplay and justice to members and are waiting for the managements to work out the cost burden of Pension as a second benefit and permutations like alternative Pension Scheme from what is already existing. If the trade union you head is one worthy of its name, you may press for Pension as a third benefit as is now obtaining in SBI.

With revolutionary regards, I remain,

Yours comradely,

C N Venugopalan