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Private, foreign banks resist common PF act

Janaki Ghatpande & Payal Bhattar

Private and foreign banks are protesting the Centre's policy to bring all banks under the provident fund and pension act, which was earlier applicable only to the nationalised banks.

At least 3 foreign banks are in talks with the central provident fund commissioner to reconsider the issue since their own PF schemes are superior to the scheme under the pension act. Private sector banks in Karnataka, Tamil Nadu and Kerala have already obtained a stay order on the implementation of the new scheme. These banks are the Nedungadi Bank, Federal Bank, Catholic Syrian Bank in Kerala, Bharat Overseas Bank, Karur Vyasa and Laxmi Vilas Bank in Tamil Nadu and Vyasa Bank and Karnataka Ltd Bank in Karnataka.

Earlier, only nationalised banks were covered under the employee's pension scheme 1995 of the Employees PF and Miscellaneous Act, 1952. Banks which had branches in more than one state were exempt from this act and maintained their own trusts to deal with employees' pension and PF. However, in February 2000, the ministry of labor had issued a notification, which brought all banks other than nationalised banks under the purview of the scheme.

About 17 per cent of the sub-staff category employees of private and foreign banks are to be covered under the PF and pension act as per the new guidelines. The scheme will encompass about 20,000 employees from these sectors. Banks are of the view that this move is discriminatory and employees stand to lose in the bargain.

For instance, earlier the pension packets used to be stuffed with allowances even if the PF contribution was minimal. Now, employees with a salary of up to Rs 5,000 per month will not be entitled to pension from the bank and will get pension from the common pool under the Central Act only from the date they become members.

Once an employee is covered, he will continue to remain under the Act irrelevant of his salary. No past service benefit will accrue because the pension scheme is effective from November 1995, and therefore, service only from that date will be counted, said an industry source.

" With the new move, the sub staff category of about 20,000 people will get excluded from the trusts. The banks will gain on their PF costs, the employees will lose substantial amount of their packages," said a banker.

In the scheme with the trust, the employee was entitled to the entire past service for pension benefit if he had opted for pension. If he had not opted for pension, he still received the management's part of contribution as well as his own contribution to the fund, with accrued interest. Therefore, his entire past service was taken into account. Whereas under the Act, the service rendered after November 15, 1999 will be taken into account," the source said.

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