RBI Pension Updatuon

[J SOMASEKARA]

I am reproducing story of RBI Pension Updation here for Benefit of members

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RBI Pension Scheme and  Related Issues

The brief background of the case is as following: 

• Reserve Bank of India Pension Regulations was introduced in the Bank in lieu 

of contributory Provident Fund in the year 1990 effective from January 1, 

1986, basically on line of the Pension Scheme available to the Central 

Government staff. 

• Since the employees were then demanding pension as third retirement 

benefit, RBI explained to the staff of the advantage of the pension scheme in 

line with the Central Government employees and stated in writing through 

Bank's circular dated March 13, 1992, that one of the positive features of the 

pension is regular updating of pension. 

•  In their circular dated March 13, 1992, the Bank  specifically mentioned ‘…. 

The general consensus is that globally pension is considered to be one 

of the best social security measures as compared to others, because of 

its certain unique features such as updation of basic pension,……’ . 

• The Bank’s assurance on updation of the basic pension was the USP of the 

scheme and, indeed, this was one of the most important considerations for 

employees to opt for pension overwhelmingly by surrendering the benefits of 

CPF.  

• For those joining the Bank’s service after November 1, 1990 the pension 

scheme was made compulsory.

• Pension updation refers to updation of basic pension pay after every wage 

revision. This is based on a formula used extensively world wide wherever 

similar schemes are available in the absence of other social security 

measures by the state. 

• If a person had retired with a basic pay of “X” and after wage revision, a 

serving employee drawing a basic pay of “X” has his basic pay revised 

upwards to “Y”, the basic pension pay of the retired employee is also suitably 

enhanced by using well established principles. Similar  principles are used in 

the case of Central Government employees.  2 

• Pension updation was a recurrent demand of the associations / unions within 

the Bank and the concept of pension updation has been accepted by the 

hon’ble courts in the  country.

• Subsequent  to the introduction of the pension scheme, the pay of the 

employees of the Bank have been revised on three occasions, viz., with effect 

from November 1, 1992, : November 1, 1997 and November 1, 2002. 

• Accordingly, the first up-dation of pension was carried out by the Bank, with 

the prior approval of its Central Board of Directors, in 2002. The pension updation was introduced with effect from November 1,  2002 for pre 1997 

retirees, which now stands withdrawn with effect from October 2008, after six 

years of its implementation. 

• In view of the objection by the Ministry, the benefits of the wage settlement 

of Nov 2002 {finalised in Dec 2006} have not yet been extended to 

pensioners. 

•  Had it been extended, the benefits would have gone to all pre Nov 2002 

pensioners. 

• The background to the withdrawal of this benefit in RBI lies in difference of 

opinion during the last six years between the Central Board of Reserve Bank 

and the Ministry of Finance on the powers of the Central Board to introduce 

the scheme of pension up-dation without taking the  approval of the 

Government of India.  

• The Ministry of Finance had raised the objection on technical ground that 

Reserve Bank did not seek permission from the Government of India to 

change the definition of  "average pay at the time of retirement", though 

Central Government is also having a similar definition of average pay for their 

pensioners that they have been changing after every pay commission.  

• If the Ministry so desired, the approval could be given a post facto. It is further 

understood that the ministry also conveyed that this up-dation of pension by 

RBI might prompt retirees from other institutions to raise similar demand 

resulting in greater pension outgo.  3 

• Under the direction of the Government, the Reserve Bank management 

withdrew the aforesaid Administration Circular No.  2 dated September 1, 

2003,  vide its circular dated October 10, 2008 and reverted the basic 

pension to the level originally sanctioned, prospectively from the month of 

October 2008.  

• The pension scheme of the Bank is entirely funded by the Bank and, unlike 

the pension scheme of Government employees, is not  a burden on the 

exchequer.  

• RBI pension fund is self-sustaining. The entire CPF of those employee 

who had opted for pension scheme in 1990 and again  in 1995 when the 

option was again re-opened had to be surrendered and the bank made a 

contribution and the Pension Corpus was thus created.  

• While pension has been made available to Central Govt. employees, Bank 

and Insurance employees in lieu of their PF @ 8.33%, the sacrifice is more for 

RBI employees, as they were entitled to 10% CPF. However, instead of 

making this differential to be factored in while computing pension benefits of 

RBI staff as and when they retire, the RBI employees were forced to accept 

this withdrawal decision.  

• We also understand that various legal opinion the Bank had sought from the 

legal experts on the issue did not find any illegality in updation of basic 

pension by the Bank    

• The 5

th

 pay commission clearly stated that an autonomous institution like RBI 

can have their own pension scheme provided their fund permits.  

• The 6

th

 pay commission clearly stated that the salary structure designed by 

them applies to all including regulatory organisations. This paves the way 

open for RBI to devise a truly independent pay, perquisite and superannuation 

structure.  

• This has altered the basic nature of the scheme  unilaterally although the 

original scheme was introduced after elaborate deliberations with all 

recognized Associations / Unions of the employees of the Bank.  The 

assurances given by the Bank have been seriously compromised. 4 

• All present employees will be adversely affected as and when they 

retire.

• Existing employees are undergoing a trauma as the basic premise of 

their superannuation calculations are now found to be completely 

missing.  

• For all future retirees, pension updation is critical since (i) we are 

certainly going to retire, (ii) cost of living will continuously go up, (iii) 

future rate of interest though unpredictable, is likely to be low, may be 

even lower than today, (iv) as retirees, we don’t have fresh earnings. (v) 

salary structure is not so high as to enable existing employees to plan a 

suitable investment policy creating a personal old age insurance in the 

form of annuity payments.  

• In case of Central Government pensioners, however, pensions are upwardly 

revised after every pay commission and the  6

th

 pay commission had 

introduced certain other welcome features also like gradual increase of 

basic pension with retirees' age. 

• Some of the benefits to central government retirees after the 6

th

 Pay 

Commission are briefly: 

o Maximum and minimum pension raised from  Rs. 33,075/- and 

Rs.2813/- to Rs. 52.200/- and Rs. 4060/- respectively. 

o Full pension after 20 years of service.

o The recent 6

th

 pay commission have even recommended   gradual 

increase of basic pension with the retirees’ age even suggesting 

that if a pensioner reaches the age of 100, his/her basic pension will be 

doubled. 

o Family pensioners will get full pension for first 10 years 

• The altered pension scheme of the Bank is now substantially inferior to the 

Government scheme even excluding the recent improvements, even though 

the employees of the Bank had to make larger sacrifice to get the same. 

Compiled by Reserve Bank of India Officers Association.

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[perumal maruthu]

Dear Mr.Somasekara,

You have reproduced a write-up hosted in the website of RBI Retired officers Pensioners Forum which appeared long back. You have not given anything new.

Their President has sent a letter dt 22/7/11 to the FM. General secretaries of Aiboc and AIBEA have also sent letters individually to the FM for updation and 100%DA etc.

Information on any further development and not repeating the old articles(readily available with AIRBIOPF website) will be much useful to the readers.

M.Perumal

Chennai

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