Revisions to bank employees’ family pensions: RBI has eased the rules for banks
The Reserve Bank of India on Monday allowed banks to amortize the additional liability arising from the family pension amendment over a five-year period commencing in 2021-22. The banks will be expected to disclose relevant disclosures of the accounting policy used in this respect in the financial statements’ ‘Notes to Accounts,’ according to the RBI.
The modification comes after the Indian Banks’ Association (IBA) expressed concern that some banks would struggle to absorb huge sums of liability related to family pension revisions in a single year.
As part of the 11th Bipartite Settlement and Joint Note of November 11, 2020, the family pension of bank employees was changed.
The RBI stated that the issues were assessed from a regulatory standpoint, and that as an exceptional circumstance, banks covered by the aforementioned settlement may take the following action in the matter.
“The expenditure… may be amortised over a period not exceeding five years beginning with the financial year ending March 31, 2022, subject to a minimum of 1/5th of the total amount involved being expensed every year if not fully charged to the Profit and Loss Account during the financial year 2021-22,” the RBI said.
It further stated that the liability for family pension enhancement should be fully recognised in accordance with applicable accounting standards.
“Just wanted to express my gratitude to Finance Minister ma’am for her approval of the Family Pension. Our request for amortisation was likewise granted by the RBI. Over 1.5 million family pensioners would gain!, “Sunil Mehta, CEO of the IBA, said in a tweet.
“Our profound thanks and gratitude to Finance Minister ma’am on behalf of the banking industry,” he added.