Rising pension bill a drain on SBI

Rising pension bill a drain on SBI
Sumanta Ray Chaudhuri

Calcutta, Nov 23: The State Bank of India’s employees’ pension fund scheme is likely to face a huge deficit if the management decides to go through with plans to implement a voluntary retirement scheme and lower the retirement age of its employees from 60 years to 58 years.

As of March 31, 2000, SBI had 2.33 lakh employees and around 30,000 pensioners.

The pension scheme was introduced with effect from July 1, 1955, i.e. since the day the bank was nationalised. All confirmed employees are eligible to get the pension, whether they retire at the normal age or opt for a VRS.

If the SBI management strictly implements its target to reduce the work force to 83,000 by the year 2005, the total number of pension scheme beneficiaries will increase to 1.80 lakh. In the backdrop of a continuous revenue deficit incurred by SBI’s pension fund during the last five years, the income graph of the fund is bound to take a sharp downturn by 2005.

SBI’s employees pension fund scheme is run by a trustee board and the fund is built up from contribution made by the employees and SBI, together with the interest earned on the income. The fund’s expenditure side includes pension and family pension payments.

Family pension payments are made to the wife or dependents of the employee’s family in case of death of the employee. For the first five years after death, the payments made under family pension are equal to the amounts paid under ordinary pension. After that, the family pension payments vary on the basis of the last drawn salary of the employee, with a limit of Rs 1000 per month.

The fund is already incurring a revenue deficit, and the SBI has had to inject a subsidy to keep it afloat. During 1998-99 and 1999-2000, SBI gave a subsidy of Rs 125.14 crore and Rs 79.81 crore respectively. Essentially, the fund’s expenditure has increased sharply during the last few fiscals, from Rs 49.28 crore in 1997-98 to Rs 153.84 crore in 1998-99 and Rs 181.96 crore in 1997-98. According to a source at the State Bank of India Officers Association (SBIOA), up to 1997-98 the basic amount of the pension was paid by debiting the trustee’s account and the dearness relief by debiting bank charges.

However, since 1998-99, both the basic and dearness relief payments were debited to trustee’s account, as a result of which the expenditure side of the fund wintnessed a massive bulge.

The SBIOA official said that, if a major chunk of employees accept the VRS, the revenue side of the fund will be under tremendous pressure. “On the one hand, with the reduction in the number of employees there would be reduction in the fund’s income as employees’ contribution dwindles. On the other hand, the number of pension beneficiaries fund will increase and drain the fund,” he said.

The SBIOA reckons, by its calculations, that the total income of the fund will come down from around Rs 331.15 crore in September 2000 to around Rs 46.85 crore in September 2006.

On the other hand, the total expenditure of the fund will increase to about Rs 549.97 crore from about Rs 120.97 crore during the same period.