Ex-servicemen re-employed in Banks to get Military Service Pay

Ex-servicemen re-employed in Banks to get Military Service Pay – Earlier clarification of Department of Financial Services dated 23.12.2012 has been withdrawn

Ministry of Finance , Department of Financial Services letter No. 4/1/2010-SCI (B) dated 23.03.2012 for denying Military Service Pay (MSP) for Ex-servicemen re-employed in Banks has been withdrawn. Hence, all the Retired Defence Personnel who are no re-employed in Banks will be eligible for MSP (Military Service Pay)

In fact, the original DOPT Office Memorandum O.M. NO. 3/19/2009-ESTT. PAY II DATED 8.11.2010 provides for grant of MSP to retired Ex-Servicemen re-employed in Banks while their pay is refixed.

O.M. NO. 3/19/2009-ESTT. PAY II DATED 8.11.2010.


The undersigned is directed to refer to the orders issued vide O.M. dated 5.4.2010 on fixation of pay of re-employed pensioners. These orders inter-alia lay down that on re-employment in civilian organizations, Military Service Pay shall not be admissible. However, the benefit of MSP given to all retired Defence Forces officers/personnel by reckoning it at the time of calculation of their pension (notionally in the case of pre-1.1.2006 pensioners) should not be withdrawn. Accordingly while the pension of such re-employed pensioners will include the element of MSP, they will not be granted MSP while working in civilian organizations.

In the instructions issued by the Ministry of Defence vide their letter No. 1/69/2008/D (Pay/Service) dated 24th July 2009, Pre-retirement pay has been defined as under:

(i)            In respect of re-employment  taking place on/or 1.1.2006 pre-retirement pay for those who retired after 1.1.2006 means the pay in the pay band plus grade pay but inclusive of Non-Practicing Allowance(NPA) if any, last drawn before retirement.

(ii)          In case of officers who retired before1.1.2006 and also those who retired after 1.1.2006 in the pre-revised pay scales without opting for the revised pay scales promulgated on or after 1.1.2006 the pay will be basic pay including stagnating increment and Rank pay plus the Dearness pay and Dearness allowance drawn at the time of retirement.

As per these orders, for pre-2006 retirees rank pay is included as a part of pay but for post-2006 retirees, the MSP is not reckoned in the pre-retirement pay for the purposes of pay fixation on re-employment. However, for pension purposes the reckonable emoluments are- basic pay + grade pay + MSP + NPA wherever admissible. Therefore, while MSP is not taken into consideration for the purpose of pay fixation on re-employment, the element of MSP in pension is deducted.

It has been decided in consultation with the Department of Expenditure, that since the element of MSP is not reckoned in the pay fixation on re-employment, it need not be reduced from the pension either. Hence, in respect of all those Defence Officers/personnel, whose pension contains an element of MSP that need not be deducted from the pay fixed on re-employment.


(Mukesh Chaturvedi)

Deputy Secretary

The full text of Department of Financial Services leter dated 28.08.2012 conveying this decision of withdrawing earlier clarification for denying MSP is as follows





No. F. No.4/1/2012-SCT (B)

dated 28-08-2012


Please refer to your D.O. No. 12(35)/2011/D(Res-1), dated 24.04.2012 regarding grievances of ex- servicemen re-employed in Public Sector Banks for fixation of their salary in banks.
2. In this connection, 1 would like to mention that the Department of’ Financial Services had circulated instructions/directions/circulars such as of the DoP&T’s earlier OM No. 3/ 19/2009-Estt.PayII dated 8.11.2010 as well as the Ministry of Defence (MoD’S letter No. 1(4)/2007/D(Pen/Policy) dated 09.02.2011 to all Public Sector Banks(PSBs)/Financial Institutions (FIs) and Insurance Companies (ICs) for compliance.
3. The Indian Banks’ Association (IBA) sought clarification from DES on re-fixation of pay to ex- servicemen re-employed in their Public Sector Banks on or after 01.01.2006. Based on DoP&T’s OM dated 8.11.2010, it was pointed by this Department vide its letter No. 4/1/2010-SCI (B) dated 23.03.2012 that Ex-servicemen re-employed in banks who retired on/or after 01.01.2006 are eligible to pay fixation in banks based on the pay drawn by them at the time of discharge from the Defence Services which would include band pay Plus grade pay but it does not include MSP. As it created confusion among banks over uniform implementation of the DoP&T’s Office Memorandum dated 08.11.2010 the circular was treated as withdrawn.
4.  It has therefore been reiterated that DoP&T’s above instructions may be followed in letter and sprit.

With regards,

Yours faithfully,
(L.K. Meena )

Download Departmental Financial Service letter No.F.No.4/1/2012-SCT(B) dated 28.08.2012