(Collected from website namely allbankingsolutions.com)
DOES A MOVE IS UNDER WAY BY RBI TO COVER UP PAST LOOT OF EMPLOYEES PENSION FUNDS - FEW FACTS THAT NEEDS TO BE PONDERED UPON BY EVERY BANKER AND STATUTORY AUDITORS ?
We reproduce extracts from the letter sent by Mr R.K. Singhal to RBI and others. This letter raises a number of questions which needs to be discussed and put up in the right perspective. We invite all the bankers, bank management, government officials and union leaders to give their views on these issues (specially who do not agree with these facts and can counter the same with relevant facts, so that necessary corrections can be made in such facts).
Reserve Bank of India
Central Office Building
Shahid Bhagat Singh Marg
Fort , Mumbai 400001
Re: RBI wants uniform Pension provision in PSU banks? Really or allowing cover up of past loot of Employees pension fund by Bank Management and distribution of loot as dividend/ incentive?
All issues listed below are based on fact which are verifiable from respective banks website and easily available at your end being part of regulatory compliances submitted by these banks to RBI and other regulators.
Issue No 1
We refer to you’re your comment appearing in Business Standard dated 14.07.2011 & 15.07.2011 “Same Pension Provisions for the Banks” Draws RBI Flak” detailed as under:
“After coming down heavily on banks for not making adequate provision for increased pension liabilities arising out of wage revision, the Reserve Bank of India (RBI) now wants all public sector banks to have uniform pension liabilities.
According to sources in the banking industry, the central bank sees no reason why each public sector bank should have different pension liabilities, since the inputs which go into calculation of pension provision are nearly the same.
“RBI says the salary structure is same, the mortality rate is similar and the attrition rate is almost the same for all government-owned banks—at around 0.5 per cent. There is no reason for different actuarial estimates for banks. It feels all public sector banks should have similar actuarial estimates,” said a banker after discussing the matter with RBI officials. The basic pension of retirees from all government banks is 50 per cent of the last salary drawn.
Bankers said actuaries of different banks have different estimates, particularly on parameters like the discount rate and the attrition rate for calculating pension liability, which has led to a variation in the burden. As far as the mortality rate is concerned, most banks follow Life Insurance Corporation of India's estimates.
The pension provision issue cropped up in the last quarter of the previous financial year, when State Bank of India (SBI) had sought the regulator's approval for pension provision from the bank's capital reserve for wage increases. As a prudential practice, banks make provision out of their profit and loss account. To use capital reserves for provision, banks need RBI's approval. After RBI’s approval, SBI charged nearly Rs 8,000 crore from its reserves to provide for pension liabilities. As a result, SBI’s capital eroded, with Tier-I capital falling below eight per cent.
Though RBI had allowed SBI to make provisions from reserves for pension liabilities, the regulator had made it clear that such requests would not be entertained in the future. The central bank had come down heavily on the bank’s chairman and managing directors at an interaction. The regulator had also made it clear such practices were non-compliant with International Financial Reporting Standards.
In 2010-11, provisioning had increased sharply because of the pay revisions agreed during the ninth bipartite settlement. Wages were raised 17.5 per cent and a second pension option was given to both current and retired employees. Gratuity limits were also increased from Rs 3.5 lakh to Rs 10 lakh. According to RBI's financial stability report, the expected additional liability for 24 public sector banks was Rs 30,366 crore, which constituted 81.9 per cent of their net profit for 2009-10. Indian Banks' Association has been mandated by RBI to prepare a pension scheme to facilitate the assessment by banks and help provide adequate provisions for such liabilities.”
Question: Why RBI has chosen to ignore the fraud committed by SBI chairman during last 4 to 5 years for showing bloated/inflated profits , higher dividend/higher ROA/ ROE/ higher book value took investor or ride, looted them?. Whether AFIR conducted every year by RBI was an eye wash? Why Chairman/ ED was allowed to loot incentive of Rs 10 lacs when profits were manipulated and he has not achieved the target set by MOF in SOI. . The detailed analysis on SBI matter has been sent to you (on 06.07.2011 through e-mail and hard copy by registered post.
Issue No 2
Why uniform guidelines today when the bank employees pension regulation 1995 which has parliamentary sanction, which have been vetted by RBI itself, already prescribed uniform guidelines for funding and administration of pension fund and pension liability?. Complete guidelines are already available with RBI because they have vetted them, which are mainly as under:
As per pension regulations 1995, 10% of pay as Statutory contribution every month should be deposited by bank in the pension fund trust.
In addition to above at the end of each year the bank shall carry out actuarial valuation and Gap if any
shall be met by the bank and deposited in the pension fund.
As per 7th BPS the Bank has to deposit from 01.11.1997 to 31.10.2002 Statutory 10% contribution +
Incremental cost of pension (Employees share 8.25% Plus Employer share 8.25% ) should be deposited
in pension fund.
As per 8th BPS the Bank has to deposit from from 01.11.2002 to 31.10.2007 Statutory 10%
contribution + Incremental cost of pension (Employees share 9.25% Plus Employer share 9.25% )
should be deposited in pension fund.
·As per 9th BPS the Bank has to deposit from from 01.11.2007 to 31.10.2012 Statutory 10%
contribution + Incremental cost of pension (Employees share 13.00% Plus Employer share 13.00% )
should be deposited in pension fund.
· As per 9th BPS one more option of pension to existing employees and the total liability on above account is Rs 6000 cr, out of which 4200 cr is to be borne by the banks and 1800 cr by employees. The banks have recovered Rs 1800 cr from the employees but not deposited/ their share of 4200 crores in the pension fund trust.
Violation of above statutory obligations by the Banks, give right to RBI to issue fresh guidelines and accede to request for amortization?
Question: Whether Why RBI has ensured that Statutory & Regulatory Compliances are followed by Public Sector banks for above pension liability?. Whether RBI Compliance Policy is worthless when the banks are violating the law settled by BPS, which have a parliamentary sanction? Whether RBI is choosing to ignore the fraud committed by Chairman on pension fund & showing bloated/inflated profits , higher dividend/higher ROA/ ROE/ higher book value took investor or ride, looted them?. Whether AFIR conducted every year by RBI was an eye wash?
Why Chairman’s/ EDs were allowed to loot incentive of Rs 10 lacs when profits were manipulated and in fact they have not achieved the target set by MOF in SOI in the past years?.
Issue No 3
Amortization of the pension cost.
· RBI circular No DBOD.No.BP.BC:80/21.04.018/2010-11 dated 09.02.2011 permitted amortization of enhanced expenditure of pension liability on account of new pension option under 9th BPS and amendment of Payment of Gratuity Act 1972 to banks, at the request of IBA vide your guidelines on Prudential Regulatory Treatment.
Please note as per 9th BPS one more option of pension to existing employees was given and the liability of Rs 4200 cr was to be borne by the banks. 1/5th of Rs 4200 crs i.e. Rs 840 cr was to be charged in Profit and Loss in 2010-11 and remaining Rs3360 cr was to be charged to Profit & loss in remaining 4 years
Against Rs 4200 crs the banks have amortized Rs 19611 cr as per table given in above referred website
How RBI has permitted amortization of Rs 19611.57 cr against agreed pension liability of Rs 4200 crs as per 9th BPS.
· Whether RBI has authority to allow violation of Pension settlement/ violation of pension regulations which have parliamentary sanction.
· Whether RBI knows that Banks have not deposited Rs 19611.57 cr in the pension fund . The banks are causing loss to the pension fund trust by not depositing their liability in the trust account. They are cheating the pension trust with a criminal intention to deny updation of pension.
· What is he meaning of amortization?. When employees have deposited their share out of agreed pension liability in the pension fund, why RBI has allowed Banks to violate the settlement by not depositing Rs 19611.57 cr in pension fund.
Issue No 4
Amortization of the pension cost: Accounting entries to be passed by Banks.
RBI circular No DBOD.No.BP.BC:80/21.04.018/2010-11 dated 09.02.2011 permitted amortization of enhanced expenditure of pension liability on account of new pension option.
We request RBI DBOD to clarify what entries bank should pass to implement your amortization guidelines.
We are of the opinion that Bank should pass the following entries:
· Dr - Differed Pension Liability on account of New pension Option Rs 19611.57 cr
· Cr - bank employees Pension Fund Trust Account
· Dr P/L Liability on account pension 1/5 of Rs 19611.57 cr – Every Year
· Cr -Differed Pension Liability on account of New pension Option1/5 of Rs 19611.57 cr
The Banks have violated the pension settlement and have deposited on 1/5 of 19611.57 c in the pension fund. It has resulted in perpetual loss of interest/earning to the pension fund. Amortization do not mean denial of due amount to pension fund trust.
We request RBI DBOD to clarify what entries bank should pass to implement your amortization guidelines?.
· The RBI must take note of fraud in the pension fund trust of bank employees is more than Rs 30000 cr alone during 2010-11 (SBI Rs 10400 crores and PSBs Rs 19611.57 cr as clear from the above chart). Whether RBI AFIR is an eye wash? How you are ensuring compliance?.
· The fraud on pension fund is being perpetuated since 01.11.1997 when 7th BPS for sharing of incremental cost was signed. Amount of fraud is much higher because six banks viz Andhra bank, Bank of Maharashtra., Corportion Bank,, PNB, PSB, Vijaya bank data of retired employees is not available on their website). Have you taken note of it Mr Governor & Dy. Governor , CGM DBOD, CGM Dept of Banking supervision ?
Questions to RBI Governor/ Dy. Governor:
· The RBI is carrying out Annual Financial Inspection (AFIR) of Banks every year. Is the AFIR of RBI is an eye wash?
· Whether during the course of AFIR, RBI monitor that regulatory/ statutory compliances have been followed by the bank?. (Please note that the depositing retirement dues are is statutory compliance).?
· Whether RBI treat such misreporting in the balance sheet & Profit & loss as fraud, if not than why it is not. Do you follow different yardsticks for different Company. Satyam chairman in Jail.
· Whether RBI has sent any special investigation team to SBI/ other PSBs to unearth the biggest scam in the pension fund trust of employees?.
· Whether RBI has taken any action or advised to ICAI to initiate action against -SCAs of SBI/ Other Banks who have certified the falsified balance sheet of past years?.
· How incompetent CAs are finding there name in the panel approved by RBI?.
· Whether RBI has reported to other regulator like SEBI, a watchdog to safeguard the investors interest. How the investors have been taken for ride by misleading balance sheet in previous years?
· Whether RBI has taken the matter with Institute of Actuaries to take action against actuaries who are giving reports which suits to then management? Have you asked the institute to carry our independent investigation of pension liability and punish the wrong doer forgiving false actuarial valuation in the previous years.?.
·CBI has already prosecuted Hiranandani builders of Mumbai and Mr Raju of Satyam computers under 120 B (punishment for conspiracy)read with 409 (breach of trust) 420 cheating 467/468 forgery 471 use of forgery 477A falsification of accounts .
·Statutory Auditors are liable under company act/ IPC /CA act for gross negligence of professional duty, failure to report material misstatement. Price Water Coopers (PWC) an international Chartered Account Firm) have also been prosecuted by CBI in Satyam Scandal.
· SEBI can prosecute under SEBI ACT because investors have been looted/cheated.
· SFIO can investigate under 235 to 247 of companies Act 1956. Please note that Satyam CMD/ Auditor/are s being prosecuted under above acts.
· Whether RBI Governor/ Dy Governor feels that by merely issuing press statement will absolve them from their constitutional/regulatory liability?.
The above communication may please be taken note for compliance because this is part of judicial proceeding of various HC/ Supreme Court where pension issues are pending and role of Regulator is under scrutiny.
FORUM FOR JUSTICE TO BANK EMPLOYEES AND OFFICERS.
Legal Aid Cell
Bhartiya Janta Party
11, Ashok Road
CC to Shri G. Jaganmohan Rao,CGM-in-Charge, Dept of banking supervison http://www.rbi.org.in/scripts/Bs_RbiEmailMaster.aspx?name=NKrishnaMohan
Shri B Mahapatra,Chief General Manager –in- Charge Department of Banking Operations and Development Mumbai – 400 005