Pension Issue not yet resolved, RBI heading big agitations in the New Year
With the year coming to an end, and no communication on the issue of updating pension yet, the Reserve Bank of India (RBI) could be heading towards big agitations in the New Year.
The government was expected to communicate by month-end its nod for improvement of the RBI’s pension scheme, but that has not been done yet.
In August, the RBI staff went on mass leave, protesting the government’s rigid stance on the issue, harming the “real-time gross settlement” system for a few hours. However, this time, the unions may go on an indefinite strike and the RTGS system, which is the backbone of financial transactions in the country, could get severely impacted for days on end, the unions have threatened.
What is the RBI pension issue
The central bank has a pension kitty of over Rs 160 billion with which it manages the pension of its staff. For this purpose, it doesn’t seek money from the government like other central government departments. At the very least, the RBI wants its staff to have pension on par with central government employees, and with a provision that it is inflation indexed, or the amount gets adjusted with inflation.
Even as this indexation benefit is somewhat there for newly retired employees, the old retired employees didn’t have this benefit. Besides, the RBI pensioners get less than central government employees, and the unions want the government to increase it to at least at par with central government employees.
Even as the government doesn’t have to commit to money here, it always has said no to the scheme. The logic here is that if they allow the central bank to have a special pension plan, it would create a “precedence risk” and other such institutions would also ask for upgrading of their pension schemes. Not everyone has a pension kitty like the RBI, and therefore the burden on the government would be immense in this respect.
The RBI had initiated an improved pension plan, which was curtailed in 2008 by the finance ministry under then finance secretary D Subbarao. However, after Subbarao became the RBI governor, he realised he probably made a mistake and tried to reverse his own order. He actively took up the issue, but could not overturn it. Subbarao became unpopular in the bureaucratic circle for his efforts, especially because it was opposite to what he himself thought was right while working on the finance ministry’s side.
“The argument that the government put forward was that the RBI did not seek prior permission before devising the scheme to improve pension. Subsequently, the said they fear the precedence risk and the impact it would have on other such institutions,” said an RBI union member.
However, after the August agitation, the government agreed to listen to the RBI’s demand, and asked for a detailed plan by December. The central bank, however, gave the plan by September itself. Representatives from the government side said they would respond by December. No such communication has come and the unions are likely to plan a prolonged agitation from January.
A medical plan
The pension issue was taken up very aggressively by subsequent governors Raghuram Rajan and Urjit Patel. Both raised the issue with the government at every possible opportunity. Patel introduced an RBI medical scheme for the retired staff, on a reimbursement basis.
“The outpatient treatment scheme was very useful and well appreciated. Updating of pension, though, is the need of the hour as there are some retired senior executives, who could be receiving pension of just Rs 3,000-5,000 as they retired 15 years ago,” said an employee of the central bank.
Notwithstanding a new governor in place, the central bank staffers are clearly losing patience, and 2019 could be a very different year for the RBI.