BANKING SECTOR REFORMS – Where the industry heading to?

Mr.Montek sing Ahluvalia, ,the  Planning Commission Deputy Chairman pitches for more financial sector reforms. He agreed with the view expressed in the OECD's latest Ind-ia economic survey that financial sector reforms should be continued.

'On the banking sector, the OECD's (Organisation for Economic Co- operation and Development)second India Economic Survey, which was released today, has recommended that the Government should reduce its stake in public sector banks to 33 per cent, as suggested by the Narasimham Committee report, to make them more dynamic. The report pointed out that the 2000 budget proposed such a measure but in the face of strong opposition from the unions it was not implemented.

“It is high time to push it through now and to go further by
completely selling smaller public sector banks in line with the Rajan Committee (2009) recommendations,” the OECD survey said. The recent performance of these banks suggests that in addition the Government should become passive shareholders and let private shareholders run these banks, the survey said. Reduction in the Government share should also apply to the State Bank of India, it added.

Public sector banks, with reduced Government holding, should no longer be governed by social objectives. The employees of the nationalised banks should have the same employment status as those in private banks.

Reducing the Government shareholding to one-third would be
insufficient. The corporate governance norms too have to be improved so that directors and chief executives are appointed by shareholders and not the Government. Also, restrictions on the voting rights of large shareholders need to be removed, so that ownership can equate with control, the Survey has said.
On the asset management industry, the OECD survey has suggested that the maximum expenses allowed for unit-linked policies should be aligned with those of the mutual fund sector.' 
Source - Business Line - 15th June 2011
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Bankpensioner page on FACEBOOK

Facebook is a powerful social networking platform on the WEB and has become very popular now a days.  
Facebook page for bank pensioners has been launched. Click on the following link to view bankpensioner page on Facebook
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Pension liabilities force JP Morgan to cut price targets of PSU banks by 10%

MUMBAI: JP Morgan cut price targets for state-run banks by as much as 10% as their pension liabilities may be many times what the market has currently factored in. It downgraded Bank of India to underweight from neutral.
"Optimistic wage inflation and mortality assumptions raise the risk of future provisions, and enhanced funding of plans threaten NIMs," analysts including Seshadri Sen at JPMorgan wrote in a report. "Pensions are putting pressure on PSU banks' poor cost-efficiencies and hampering competitiveness. Cheap valuations discount this only partially - prospects of negative surprises.''
 

Many analysts and investors are turning negative on banks mainly due to rising interest rates that could lead to higher bad loans. For state-run banks, the pension liabilities could be bigger. State Bank of India shocked the market with a 99% drop in earnings in the fourth quarter of last fiscal, partly due to such provisions. The BSE Bankex has fallen nearly 7% since January while the benchmark Sensex fell 10% during the same period.

"We think the current assumptions ignore the impact of the bi-decadal wage increases from collective bargaining, probably because it's not a certainty" said Sen. The agreement with the unions expires in Sep 2012, and another lumpy provision is likely in FY14. PSU banks and unions renegotiate wages every five years - wages expanded by 18% during the previous settlement for 2007-12. The report also says, with non-pension benefits (post-retiral medical, for one) adding to the pressures, the recent pension changes have blunted the cost efficiencies. "We estimate pension liabilities to expand at 20% against the discount unwind of 8%, with the risk of periodic capital shocks."

The provisions will be uneven, and we estimate that obligations will have to rise by 20% per annum for the next five years to adjust to realistic assumptions. Also, the provisions for state-owned lenders have risen consistently for the past seven quarters as they are migrating to a more stringent computer-based system of identifying bad loans and have set aside more money for restructured loans. PSU banks are more at risk because of their comparatively high exposure to small agriculture loans below 50 lakh which can register as NPAs if not repaid for more than 90 days.

Source - Economic Times dtd 2nd Jun 2011

AIBOC letter to IBA regarding pension to officers retired under VRS scheme of bank or retired under exit option scheme by subsidiary banks

We reproduce below the letter by Shri G. D. Nadaf, General Secretary AIBOC

Quote

No.1452/229/11                                                   30.05.2011

To, 
Shri M.D.Mallya, 

Chairman,
The Indian Banks’ Association,
World Trade Centre Complex,
Centre 1, 6^th Floor, Cuffe Parade, 
MUMBAI – 400 005.

Dear Sir,

PENSION TO OFFICERS WHO “RETIRED UNDER THE VOLUNTARY RETIREMENT SCHEME OF THE BANK” OR “RETIRED UNDER EXIT OPTION SCHEME” INTRODUCED IN SUBSIDIARY BANKS

         We draw your kind attention to our letter No. 1452/156/11 dated 09.03.2011 wherein we have made out a case for granting another option to join the Pension Scheme to those officers who sought Voluntary Retirement from service of the Bank as provided in OSR 19(1) to 19(7) and who did not opt for pension earlier due to various reasons. As you have not responded positively to our earlier letters i.e., Letter No. 1452/302/10 dated 28.08.2010 & Letter No.1452/482/10 dated 29.12.2010, we were compelled to invoke the provisions under clause No.14 of the Joint Note signed by IBA and AIBOC and other officers’ organisations on 27.04.2010. But to our chagrin neither you have furnished us your points of view on the issue as to how and why the above category of officers have been denied the opportunity to join the Pension Scheme nor have arranged for a Meeting to resolve the issue in an amicable manner to the satisfaction of all concerned.

Letter by Shri C. H. Vekatachalam, GS - AIBEA, to FM on various issues pertaining to Pension and Retirees

Mr.C.H.Venkatachalam, General Secretary of  AIBEA has written a letter to or FM,on important issues pertaining to retirees:

Same is reproduced here below for the information


AIBEA/GS/ 2011/52
25th May, 2011

To
Shri. Pranab Mukherjee,
Hon’ble Minister for Finance,
Government of India,
North Block,
New Delhi

Dear Sir,
                        Reg : Grievances of Bank Retires

The All India Bank Retirees Federation and United Forum of Bank Retirees Organisation have been representing to the Government and Indian Banks Association to redress some of their genuine grievances and demands but with no effect so far.  You are well aware that the Pension Scheme evolved and introduced in the Banks is exactly on the lines of Central Government Pension Scheme and hence some of the improvements that have been incorporated in the Government Pension Scheme consequent to the 6th Pay Commission need to be extended to the bank retirees also.  The recent extension of one more option to join the Pension Scheme has brought great relief to number of retired employees and officers who are today covered by the Pension Scheme and we are thankful to the Government for the same.
But the following issues of the bank retirees deserve the special attention of the Government and your sympathetic consideration.

1.      For the Government employees, on occasions of salary revision, pension revision is also given and accordingly their pension is updated.  But in the case of bank retirees, the Pension remains static as sanctioned at the time of their retirement and does not undergo any change thereafter.  The periodical updation of pension along with salary revision of in-service employees is very genuine and fair expectation, especially when the same is available to the Government
employees.

2.      Since their pension is fixed based on their pay at the time of their retirement, there are currently 5 different price index (600,1148, 1684, 2288 & 2836) on which DA is paid to the retirees depending upon their period of retirement i.e. 1-1-86 to 31-10-92,  1-11-92 to 31-3-98, 1-4-98 to 31-10-2002, 1-11-2002 to 31-10-2007 and from 1-11-2007 onwards.  Their pension needs to be adjusted and upgraded to a common price index by merging the DA upto that level .  This will bring in uniformity of indexing the Pension of the retirees.

3.      In payment of DA, after introduction of 100% neutralization against price rise from 1.11-2002, those who have retired after this date are being given 100% neutralization for price rise while the past retirees continue to be paid DA on a tapering basis with 4 slab formula of the
earlier system.  There is a genuine need to extend 100% DA
neutralization to all the retirees atleast from a prospective date.

4.      While the in-service employees get DA variation on quarterly basis,  for retirees, DA on Pension is paid on half yearly basis.  This needs to be changed to quarterly basis for retirees also.

5.      Under the 6th Pay Commission Report, there are improvements in the rate of pension for very aged senior citizens, in the commutation of pension, eligibility service to get full pension, etc for the Government pensioners and these need to be extended to the bank retirees too.

6.      It is also experienced that the quantum of Family Pension is very inadequate and this requires a sympathetic approach from the Government to revise the same suitably.

7.      Since the Pension Scheme was introduced in the Banks from 1.1.1986, the pre-1986 retirees are being given a Ex Gratia of Rs.300 per month + DA and their widows are being paid a fixed lumpsum Ex Gratia of Rs.1000 per month.  These pre-1986 retirees are aged 85 years and above and are very few in number, may be around 6000 persons in the entire banking sector. Considering their age, ill-health, etc. the Government should kindly increase the Ex Gratia amount.

8.      There are number of grievances of the retirees at the Bank Level regarding delay in sanction of Pension, delay in disbursements, etc. and hence Government / IBA should give proper guidelines to all Banks to put in place a regulated mechanism to redress these grievances. This will help in avoiding / reducing litigations, etc. on the part of the retirees.

9.      Government has already advised the Banks to set apart a portion of  the amount allocated for Staff Welfare from the Net Profit of the Banks towards benefiting the retirees. Still it is not being implemented properly. Hence Government may consider advising the Banks to set apart an uniform percentage of funds from out of the profits towards Welfare Schemes for the retirees.

10.     The in-service employees are entitled to reimbursement of medical  expenses on occasions of hospitalisation but after retirement, the retirees are not covered by such facilities.  In the context of ever increasing cost of medical treatment, retirees become extremely vulnerable when they fall ill and hence some uniform medical expenses reimbursement scheme needs to be made available to them.

These are some of the important grievances and demands of the bank  retirees.  We request you to take a positive view of their grievances and advise necessary steps to be taken by the Government / IBA in this regard.

Thanking you,
Yours faithfully,


C.H.VENKATACHALAM
GENERAL SECRETARY

Copy to :-
Chairman,
Indian Banks Association,
Mumbai.

The letter does not cover plight of pension option to VRS retirees of PF optees and of Resigned staff. PRESUMABLY, THE matter is subjudice and hence possible exclusion. Lets hope good things happen to all.

Source: Shri Mohan V. R.  - Chennai . 

                       Bankpensioner google Group Member