The unions, meanwhile, are threatening to go on strike if banks do not respond to their demand for holding discussions in the next two to three weeks.

The bone of contention between the Indian Banks' Association and the unions is the additional funds that would be required to cover nearly 2.8 lakh employees of 19 nationalised banks and the seven associates of State Bank of India [Get Quote] who did not opt for a pension scheme when a choice was offered in 1995.

IBA had placed the additional requirement at Rs 26,000 crore (Rs 260 billion) after taking into account about Rs 9,000 crore (Rs 90 billion) of balances in the employees' provident fund accounts, while unions have estimated that an additional provision of only Rs 4,700 crore (Rs 47 billion) would have to be made.

The funding gap would be apart from the additional liability of Rs 14,000 crore (Rs 140 billion) for the entire banking industry because of the revised accounting standard-15 (AS-15), which requires all companies to make an assessment of all retirement benefits and make provisions now accordingly.

SBI's 2.5 lakh employees are not part of this industry-wide pension arrangement and, in fact, enjoy all the three benefits of provident fund, pension and gratuity. Of the total employees currently in nationalised banks and SBI associates, 2.85 lakh are those who have opted for provident fund and 2.9 lakh had opted for pension in 1995.

"We have said that the gap (the additional requirement) cannot be negotiated. Once the gap has been arrived at you can negotiate how to fund the gap," said an IBA official.

Banks have referred the matter to the ministry. Earlier, the unions had cancelled their proposed three-day strike and agreed to a discussion with the IBA. The unions had enlisted 3-4 actuaries to arrive at estimates for additional financial provision for pension to the employees.

"We have written to the IBA that they should respond to us in the next two to three weeks. If we do not get a response from them by then, we will take a decision to revive the agitation at the United Forum of Bank Unions meeting in Delhi in the third week of  August," said C H Venkatchalam, general secretary, All India Bank Employees Association.

The IBA official said, "There cannot be a Rs 20,000 crore (Rs 200 billion) difference in calculations as under the new Accounting Standard 15, on employee retirement benefits, there should be a standard way to arrive at the gap. We have asked the government to advise us on the way ahead." IBA's argument is that since the whole matter has been referred to the government, they would respond only after hearing from the government.

According to sources, the unions considered a stagnant dearness allowance, annual increases in salaries of just 3 per cent and a high return on investment of 8.5 per cent.

The unions had in the past proposed to share the burden of the potential shortfall if there was an agreement on allowing all the remaining employees to opt for pension.

"They (unions) have not submitted any scheme for meeting the gap," the IBA official said, but unions' counter point is that any burden sharing formula could be arrived at only through discussions.

In 1995 when the pension scheme was introduced, bank employees were given the chance to opt for provident fund or pension. At that time, 50 per cent of the now serving bank employees had opted for the pension scheme, while the rest stayed with the provident fund scheme, as the average rate of return on PF was then around 10-12 per cent.

The rate of interest on provident fund is now 8.5 per cent.