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08
February 2019
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| Bank (The Total Investment & Insurance Solutions |
The government is mulling capital infusion in
regional rural banks to reduce the payout burden of the new pension scheme
which threatens to derail these banks’ lending to small and marginal farmers,
two people familiar with the development said. The government has approved a
new pension scheme for RRBs following the Supreme Court’s order to pay higher
pension and bring it at par with the pension scheme in nationalised banks.
The new scheme also covers persons already
drawing pension. The Department of Financial Services has directed the National
Bank for Agriculture & Rural Development (Nabard) to ascertain the size of
the capital requirement, one of the persons cited earlier told ET. Nabard, in
turn, has directed every RRB to appoint actuaries for the calculation. Each of
these banks will create a pension corpus by transferring fund from their profit
and loss account. This exercise would dampen their profit numbers and may also
lead to book losses. This, in turn, could put strain on their capital as the
banks will not be able to plough back profit.
“The
shortfall in their capital risk adjusted ratio (CRAR) will be made good by the
government,” people involved in the process of finalising the new pension
scheme told ET. While the actuarial valuation on the pension corpus will take
some time, RRB union members are guessing that the cumulative size could be up
to Rs 20,000 crore. A part of it—about Rs 5,000 crore— can be taken from
Employees’ Provident Fund Organisation.
The government will infuse 50% of the capital
requirement while public sector banks with their 35% holding in each RRB, and
the respective state governments with 15% shareholding, will have to share the
burden proportionately. However, doubts have been raised as to whether banks
under prompt corrective action framework will able release funds. RRB employees
had won a protracted legal battle in the Supreme Court for parity in pension in
April last year.
A
Nabard official said that about 13 RRBs have started paying pension with effect
from April 2018, while the arrear payment before the cut-off date may not be
considered due to practical difficulties. There are 36 of such banks operating
across the country now. Leaders of their employees association said they would
move court again to fight for arrear payment. At present, about 30,000-odd
retirees since 1993 are eligible for revised pension. It has been decided that
RRB employees, who were in service as on September 1, 1987, will be eligible
for the new pension scheme. RRB employees who joined the service after April 1,
2018 will not be eligible. The Total
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