Tuesday, July 11, 2017

Irregularities in maintenance of Employees Pension Fund in Punjab National Bank

 We reproduce below two letters on he above subject , addressed to CMD, Punjab National Bank and Secretary, Department of Financial Services, Ministry of Finance, Govt of India , by Conveners CBPRO

Date: 04.07.2017
The Chairman & Managing Director
Punjab National Bank
New Delhi
Dear Sir,
Sub: Pension Fund
It has been brought to our notice that a sum of Rs. 2056 crores has been written back from Pension Fund and  Gratuity Fund to Bank’s Profit & Loss A/c reportedly on actuarial valuation but allegedly to shore up the bottom line. We are equally concerned about the bottom line of every bank not because the livelihood of most of our members depend on the well being of these banks but more because our past is inextricably linked to these banks and that the bondage is unbreakable. While every retiree will be too glad to place their services at the disposal of their respective banks they also expect the banks to respect the contract regarding terminal benefits. The PNB Employees Pension Regulations, 1995 speaking about pension fund, to ensure prompt payment of pension states in Regulation 11 as under:
Actuarial Investigation of the Fund- The Bank shall cause an investigation to be made by an Actuary into the financial condition of the Fund every financial year, on the 31st day of March, and make such additional annual contributions to the Fund as may be required to secure payment of the benefits under these regulations.
Provided that the Bank shall cause an investigation to be made by an Actuary into the financial condition of the Fund, as on the 31st day of March immediately following the financial year in which the Fund is constituted.”
From the above it is clear that the actuarial investigation is made only to identify shortfall if any so that the bank shall make good the same by providing adequate additional contributions. There is no provision to reverse the money already credited to the Pension Fund.
We have no reason to suspect the findings of the actuary or to believe the rumors that a doctored actuarial valuation was obtained at your instance to shore up the bottom-line artificially. If there has been truly a reversal of any amount from the Pension Fund, we find it hard to accept the same because Pension Fund is a Trust created to ensure payment of pension to pensioners. Pension Fund being a Trust Fund is expected to be managed in conformity with Pension Regulations which is a subordinate legislation. Bottom-line considerations though important and necessary cannot overlook a statute. The Bank could have thought of alternatives to bring out the true state of affairs without violating the Pension Regulations. The Pension Fund that was made a trust to guarantee the pension of senior citizens (retirees) cannot be made to lose its meaning however bonafide the motive has been. This one aberration has come as a rude shock to us and we feel this aberration should be avoided. We hope and trust you would understand our anxiety.
We request you to immediately initiate appropriate steps to set right the aberration and safe guard Pension Fund & Gratuity Fund and set at rest the anxiety caused to the retirees and all those employees and officers serving in your Bank who have opted for pension. Please treat the matter most urgent.
Thanking you,
With regards,
A.Ramesh Babu    K.V.Acharya
Joint Conveners


 Quote :
Mrs. Anjuli C. Duggal,
Department of Financial Services,
Ministry of Finance,
Government of India,
New Delhi.
Respected Madam,

Irregularities in maintenance of Employees Pension Fund in Punjab National Bank

It has been brought to our notice that the management of Punjab National Bank has written back a sum of Rs  2026.60 from Pension and Gratuity Funds adopting a different accounting method within the accounting standards
for the first time ever so as to improve its operating profits as on 31.3.2017 in an artificial manner. This amount was consequently utilized to increase the provision for Non-Performing Assets by Rs 1920.85 crores and thereby
reduce the Net NPAs as on 31.3.2017. It appears that the management has done so after causing an investigation
by the actuary into the financial condition of the fund in terms of Regulation 11 of the Pension Regulations. The action of the management is ultra virus of the regulations in as much as the actuary's investigation is required to help the bank make additional annual contributions to the fund as may be required to secure the payment of benefits under the regulations (Regulation 11). It does not permit or even remotely provide for the write back of earlier contributions made to the Fund.
Regulation 13 provides for the payments out of funds viz." the payment of benefits by the Trust shall be administered for grant of pensionary benefits to the employees of the bank or the family pension to the families of the deceased employees of the bank". There is no regulation in the Pension Regulations which could be construed to authorise the Management or the Trust to Debit the fund on account of any other purpose including a write back of the earlier contributions made by the bank to the fund. In the absence of any express provision authorising such write back, the action of the management/trust would amount to misappropriation of the Employees Pension Fund. Such an action if not rectified/reversed immediately could entail legal/criminal liability for breach of trust and misappropriation of employees' pension and gratuity funds.
As you are aware, many Public Sector Banks have been under stress for the last 8-10 quarters. We apprehend that
there could be some other banks who have indulged in similar acts of impermissible nature and also not adequately contributed towards Pension Fund including their share of contribution towards Second Option which was amortised for over 5 years from 2010. We therefore request you to look into the matter and ascertain the facts from all the Public Sector Banks so as to initiate suitable corrective action in this regard. It is imperative to underscore that the managements of the banks cannot be allowed to use the Employees' Funds as a floating provision to be utilised whimsically to tide over their financial difficulties during the period of stress by writing
back the contributions made earlier to the employees' pension/gratuity funds.
We earnestly seek your kind intervention in the matter.
Thanking you,
Yours faith fully,
Joint Convenors

Source : AIBPRC Website


  1. Please file formal complaint with PFRDA ( Pension Fund Regulatory and Development Authority of India) with a prayer (A)to reconstitute the PNB Pension Fund Trust with representatives of PFRDA,GOI,Bank & retirees organisation (B) Order for return of the funds illegally debited from pension fund.(C) Impose suitable penalty on PNB for misappropriation of pension funds.

  2. Please also explore whether a complaint can be filed for diversion of funds under Prevention of Money Laundering Act.

  3. It is beyond one's comprehension that actuarial valuation can find surplus in the present environment of falling interest rates. It is suggested that retirees organisations should ask the bank to make public the actuarial valuation report to know whether the same is based on standard accounting principles.

  4. Why requesting the Management of PNB instead of punishing all the persons involved? What prevents the government from initiating criminal action. Are government officials are also hand in glove? Is the letter jjust an eye wash?