New pension plan to lure PSB staff

New Delhi, July 26 | Updated: Jul 27 2006, 05:30am hrs
The finance ministry is under pressure from public sector bank employees to initiate a scheme by which they can opt for pension benefits in place of contributory provident fund.

While 60% of the total employees enjoy pension benefits, 40% are covered under the contributory provident fund scheme.As per the ministry estimate, the move is likely to result in an additional outflow of about Rs 15,000-16,000 crore for the banks annually.

There is a lot of pressure on us to allow employees to switch over to the pension plan instead of the contributory provident fund scheme. But considering the huge cost, we are not keen on this, a senior government official said.

The exact outflow would depend on the size of the bank. At present, the employees of government owned banks except the State Bank of India enjoy two retirement benefits gratuity and either pension benefits or contributory provident fund. SBI employees enjoy three benefits. Officials pointed out that pension benefits not only provide social security, but also give monthly amount to individuals.

Provident fund, on the other hand, is a one time payment to the individual and the interest rate, currently 8%, may come down. The public sector banks all put together, excluding SBI, currently, have a pension corpus of only Rs 2,100 crore.

Meanwhile, the finance ministry has asked the banks to initiate the exercise of switching over to the proposed new pension scheme (NPS), which is based on the defined contribution model and not defined benefits.

The move, however, may not be easy as the trade unions have come out strongly against the move. u

It is understood that the trade unions would take up the issue next year, when talks on wage revision starts. The cut off salary for calculating SBI employees pension benefit now is Rs 21,040 as compared to the earlier Rs 8,500.