NPS compulsory for Rural Bank Employees

The government is all set to make National Pension Scheme compulsory for new regional rural bank employees.

The defined contribution pension scheme will come into place for employees joining after March 31 this year, two people familiar with the development said.

The Department of Financial Services (DFS) has finalised it Monday at a meeting with senior officials of National Bank for Agriculture & Rural Development and nationalised banks, which own 50% in RRBs.

NPS is already in place for nationalised bank employees since April 2010.

The defined contribution scheme is launched in January 2004 for government employees. It was opened to public in 2009. Subscribers can opt for investing in fixed deposits or liquid funds or can choose equity investment up to 50% of their corpus.

DFS has also finalized the modalities for the pending pension scheme for existing RRB employees and retirees. It has decided that people who were in service as on September 1, 1987 will be eligible for pension at par with nationalized banks.

RRB employees, which were fighting for parity for the past two decades, received a verdict by Supreme Court in their favour in April this year.

They will get pension will effect from April this year but decision on arrears prior to April is yet to be taken, sources said. Officials of a dozen nationalised banks and chairmen of four RRBs attended the meeting.

It has also been decided that RRBs will pay pension from their working capital till a structured pension fund or trust is created as per provision of Pension Regulations.

About 27,000 retired RRB employees will start getting pension now. Earlier they used to get a measly pension payment (anything between Rs 1000 and Rs 2500 a month) from Regional Provident Fund Commissioner. Pensioners will have to refund payment made by the RPFC from April.

The rate of basic pension will be 50% percent of the average pay as defined in pension scheme for full time employees. Accordingly, a person who used to draw Rs 2500 from RPFC will now receive Rs 35000 a month, senior RRB employees said.