The dearness allowance (DA) of 7th pay commission central employees has been increased by 11 percent by the Modi government. After which many state governments also increased the dearness allowance of their own employees. RBI has made a big announcement for bank employees. The same amendments have been made in the Employees’ Family Pension Rules.
The Reserve Bank allowed banks to amortize additional liability on account of revision of 7th pay commission family pension in five years starting from 2021-22. RBI said that banks will have to properly disclose the accounting policy to be followed in this regard in the ‘Notes to Accounts’ of the financial statements.
The relaxation has been given following a request from the Indian Banks’ Association (IBA) that it would be difficult for some banks to absorb the huge amount of liability in respect of revision of family pension in a year. The family pension of employees of banks was revised as part of the 11th Bilateral Settlement and Joint Note dated November 11, 2020. The RBI said the issues were examined from a regulatory perspective and the decision as an exceptional case It is suggested that the banks covered under the above settlement may take the following action in the matter.
RBI said that “expenditure…, if not fully charged to the profit and loss account during the financial year 2021-22, shall be subject to a minimum period of five years commencing from the financial year ending March 31, 2022.” Amortization can be done over a period of more than years. This is 1/5 of the total amount to be spent every year. It states that the liability for increase in family pension should be recognized fully in accordance with the applicable accounting standards.
IBA CEO Sunil Mehta said in a tweet that thanks to FM Madam for the approval of family pension. #RBI also accepted our rectification request. More than 1.5 lakh family pensioners are going to be benefitted! He said that our heartfelt thanks and gratitude to #FM Madam on behalf of the banking industry.
