Ex-servicemen To Finance Minister

Under Secretary (Welfare)
Ministry Of Finance
Department of Financial services (welfare)
Govt. of India
New Delhi.

Letter No. PER/ 01/2014 14 June 2014

Dear Sir,

Subject: Discrimination of pay fixation of Ex Servicemen - Re-employed in PSU banks

Reference is made to your office letter No. File No. 4/3/2012-SCT (B) /Welfare letter dated 30 December 2013, addressed to the Chairman of Indian Banks Association (IBA) and also the new guidelines issued by IBA for fixation of pay of Ex-servicemen (ESM) re- employed in Public Sector Banks (PSBs) after 01.01.2006.

2. It is observed that the IBA has not only misinterpreted and violated the established Government policies and existing guidelines issued by different departments of Government of India, but also violated instructions issued by your office vide the ibid letter. I am listing certain points for your kind consideration and urge your good office to review your consent given to IBA as IBA has instructed the banks to implement the new guidelines and also to review the pay fixation already done in case of Ex Servicemen re-employed PSU Banks. 

 a) Pay fixation of Ex Servicemen is a privilege extended only to Personnel Below Officer Rank (PBORs) re-employed in Group ‘C’ and ‘D’ posts in PSUs. The subject matter is governed by Govt of India, Min of PP&G (Dept of personnel and Trg) OM No. 2/1/86/Est Pt – II dated 31 Jul 1986. Department Personnel and Trg O.M. No. 3/19/2009-Estt (Pay II) dated 05 April, 2010 was issued to clarify and amend few aspects mentioned in the earlier O.M. No.3/1/85-Estt (Pay II) dated 31 July, 1986 wherein the basic pay in the revised pay structure is mentioned as pay in the pay band plus grade pay attached to the post. The original O.M. No.3/1/85-Estt (Pay II) dated 31 July, 1986, clearly states that last drawn pay of ESM is a combination of many components of pay including Basic Pay, Pay (including deferred pay), Good Service/Good Conduct pay, Air Proficiency pay, Badge pay, War Service increments Classification pay and Deferred pay. The Sixth Central Pay Commission has revised the Basic pay structure of PBORs in Defence Forces as a combination of Pay in band, Grade pay, Military Service Pay, X Group pay, Good Conduct Badge pay and Classification pay. 

 b) The total pay in the revised pay structure as per VI CPC should be considered as pay in the pay band plus the grade pay attached to it along with MSP, X Pay, GCB pay, Classification Pay if any for Personnel below Officer Ranks (PBORs). For Officers, the Pay is pay in Pay Band plus Grade Pay attached to the post along with MSP and Non Practicing Allowance, if any. IBA in its letter has presumed that once these components are not mentioned in the definition of pre retirement pay they need not be protected. This contradicts the earlier procedure of re fixation of pay followed in PSBs. Earlier along with Pay (including deferred pay), Good Service Conduct Pay, Badge Pay, Classification Pay, Qualification Pay formed pre retirement pay. In the revised pay structure the concept of Basic Pay was replaced by running pay bands along with the introduction of grade pay. Rest of the components like classification pay, Badge Pay continued to be paid along with the introduction of new components like X Pay and MSP.

 c) Regarding Military Service Pay (MSP): As per THE GAZETTE OF INDIA : EXTRAORDINARY , MINISTRY OF DEFENCE, RESOLUTION, New Delhi, dated 30th August, 2008 ( page 22) clearly states “the MSP shall count as pay for all purposes except for counting annual increments”. 

d) Regarding X Group Pay (X Pay) : (Vide Service Instructions - (a) For Service Officers : SAI-2/S/2008, SNI – 2/S/2008, SAFI -2/S/2008 (b) For PBOR : SAI – 1/S/2008, SNI – 1/S/2008, SAFI – 1/S/2008). For reference as per SPECIAL AIR FORCE INSTRUCTIONS No. 1/s/2008 dated 27th October 2008 (Corrigendum) states that for X Pay as – “ It will be counted as Pay for all purposes including for calculation of annual increments”.

e) IBA in its annexure quotes MoD letter No. 1/69/2008/D (Pay/Service) dated 24th July, 2009 for the purpose of definition of pre retirement pay. It says pre retirement pay for those who retired on or after 01.01.2006 means the pay in the pay band plus grade pay but inclusive of Non-Practicing Allowance (NPA) if any, last drawn before retirement. This definition relates to officers pay component like NPA (Accorded to Medical Officers) but ignores the pay components like X Pay, Classification Pay and Good Conduct Badge Pay etc. accorded to the Personnel Below Officer Ranks (PBORs). Hence in its letter IBA excludes all other components of pay like classification pay, GCB, MSP and X Pay from re fixation on the pretext of not being mentioned in the definition of pre retirement pay as per MoD letter No. 1/69/2008/D(Pat/Service) dated 24th July, 2009. The components like Classification Pay and GCB were being protected since years and discontinuing it in ambiguous pretext is illogical.

 f) IBA through its letter dated 16.03.1992 reckons Special Allowance for fixation of Pay during re-employment in the bank on the grounds that Special Allowance is accorded for DA and is considered for calculation of pension benefits in the Banks. The same criteria should be applicable to all the other pre retirement Pay Components also. Military Service Pay, X Group Pay, as well as GCB pay and Classification pay are vital components of pay structure that was introduced to maintain categorical difference among the personnel of defence forces by the Sixth CPC. Dearness Allowance as well as pension benefits of PBORs are determined on the basis of total of these pay components which constitute the last drawn pay. While denying these components of Last drawn pay of ESM for re fixation of Pay and on the other hand, considering Special allowance on the re employed scale itself is a clear indication of double standards and contradiction to natural justice.

g) To justify excluding MSP from re-fixation, IBA in its annexure 2.1(ii) says that the benefit of MSP is accorded to the Ex servicemen in pension and Ex servicemen are allowed to draw entire pension. Whereas these factors mentioned cannot be considered for excluding MSP from re-fixation of pay as DoPT letter No. 3/19/2009-Estt (Pay II) dated 05.04.2010 through 4(b) i, 4(c),

 4(d)i clarifies that Ex servicemen can avail the benefit of the entire pension and pension equivalent of retirement benefits. and also the O.M. dated 08.11.2010 also clarifies about MSP as “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”. If we apply this silly logical conclusion given by IBA for excluding MSP, then Pay in band and Grade pay which are part of the pension also may be excluded.

 3. Hence, you can see that the IBA had referred to inappropriate and insufficient data and grossly misinterpreted and violated many existing Government policies and guidelines. Your letter dated 30th December 2013 clearly instructs IBA also to clarify the date of implementation of these guidelines, prospective or retrospective and the mode of tackling effect of financial implications, which IBA did not adhered to.

4. Most of the PSU banks complete the pay fixation of Ex Servicemen re-employed after six months of joining and their pay is fixed at a stage just above the Last drawn pay by them in Defence forces, which is the correct method to do. But now IBA has asked to review the pay fixation done so as per their new guidelines, which will result in removing the major part of the pay so fixed and the very purpose of re fixation for the purpose of protection of Last drawn pay by an Ex Servicemen will be impaired. Deduction of the pay already paid for the last three or four years would also result in huge financial loss to individuals and imbalance their financial stability which in turn may cause huge embarrassment to the new Government which is “determined to do everything to repay the debt of our brave and selfless soldiers”.

5. My Case - My basic pay in Indian Air Force was Rs 10670 and total emoluments was Rs 17287 including MSP as on 31.12.2006 as per IV CPC. The basic pay fixed by bank was Rs Rs 11100 including MSP & Spl Allowance of Rs 500 and total emoluments was Rs Rs 18557 as on 30.11.2011 an increase of Rs 1270. The bank ignored the inflation raise from the year 2006 to 2011. If MSP withdrawn I would be earning an amount of Rs 15854 a reduction of Approx 8.5% of pay when compared to IAF pay. This condition is faced by many Ex-Servicemen and bank completely ignored in projecting our case. The copies are attached.

6. So taking into consideration of the facts stated above, we urge you to instruct the IBA to withdraw their circular immediately and also to issue a new order to include all the components of last drawn pay by Ex servicemen while fixing their pay on re-employment in PSU banks, which will be a big relief to thousands of Ex servicemen who had sacrificed the best years of their lives in safeguarding our Motherland. I am hoping for a fast and positive action on this sensitive issue.

Thanking you Sir,

Yours faithfully,

Narayanan Ravikumar

Copy to:(Physical Copy Follows)

1) The Secretary
Ministry Of Finance
Department of Financial services (welfare)
Govt. of India
New Delhi.

2) The Secretary (ESW)
Dept of Ex servicemen welfare
5-A, South Block. New Delhi-110011.
Ministry of Defence, Govt of India

3) The Joint Secretary (ESW),
Dept of Ex servicemen welfare
99-A, South Block. New Delhi-110011.
Ministry of Defence, Govt of India

4) The Secretary
Dept. of Personnel & Training
Ministry of Personnel, public grievances and pensions
Govt of India, New Delhi-110011

Pay Fixation For Pensioner

Should Every Branch be Audited by

 Chartered Accountant (CA) ?

Team of Auditors are building pressure on Modi government to order audit of every branch of every bank. They say that if branches are not audited, risk of these branches may increase and ultimately jeopardize the existence of bank. But the bitter truth is that majority of Auditors simply sign the balance sheet as per whims of the management of banks provided they are given red carpet welcome and offered costly gifts. This is why major chunk of NPA exists in majority of branches which are regularly audited by team of not only external auditors but also internal auditors of the bank. 

We remember the case of Satyam computers and latest example of United bank of India. There are lacs of such cases where branches of banks have suffered loss  even though auditors had certified the overall health of bank's assets and also the quality of balance sheet. In every branch, many bad accounts have been certified by auditors as good assets during last decades. Now when banks have adopted CBS technology and when government is insisting for identification of NPA through System based technology, all bad debts are slowly surfacing and disturbing sleep of top officials .Banks are facing erosion of capital and crisis of capital to meet Basel III requirement only due to sudden and systematic rise in NPA of every public sector bank and resultant fall in profits.

We have seen in recent past how majority of public sector banks intentionally and willfully avoided provisioning on terminal benefits and bad debts just to inflate profit and share value of the bank. They used to conceal bad debts in nexus with team of auditors only.

When this fraudulent activity was caught by financial experts, trade union leaders and by opponent politicians during UPA rule, government permitted banks to amortize the provision in five years .All these banks used to manage certificate of good health from team of hundreds of auditors every year.

This is why I am of strong view, that auditing of all branches at the behest of team of ICAI will be a futile exercise and add burden on the balance sheet of all banks. It will add fuel to fire because banks are already facing acute and critical sickness due to high percent of NPA

 It will not be surprising however if the leaders of ICAI manage change in rules by gifting some politicians. Auditors are clever and to please politicians they compromised with quality of Chartered Accountant. It is they who managed 28 percent pass result in CA examination compared to 2 to 3 percent pass result in preceding years. Quality of CA has faced considerable deterioration in last few years and hence they can cause much more damage than natural loss going to occur to banks without audit. 

It is auditors who teach mantras to business community how to evade tax and it is they who in nexus with IT officials impose penalty to honest tax payers without any valid reason. It is CAs who manage top officials of banks and get the work of auditing for various branches allotted to them. They share the audit fee with top officials by various ways and means of modern era which I need not enlighten elaborately.But it is open secret that auditing has become a mere formality and majority of auditors are manageable as per whims and caprices of top officials of banks as also that of private business houses.

Review bank branch audit norms: ICAI-Hindu Business Line ( read my opinion given above

NEW DELHI, JULY 2:  

The new Modi-led Government should review the existing bank branch audit norms, K Raghu, President of the Institute of Chartered Accountants of India, has said.

All bank branches in the country should be subjected to financial audit, Raghu suggested to the Finance Minister Arun Jaitley at an event here marking the chartered accountants’ day celebrations.

Currently, certain segments of the bank branches—those with advances less than ₹ 20 crore –are not subjected to an annual independent audit, Raghu said, adding that this position needs to be changed.

The UPA Government had from 2012-13 stipulated that all bank branches with advances of less than ₹ 20 crore in a financial year need not have an annual independent audit.

This decision--which led to nearly 85 percent of the bank branches going out of annual audit net-- had upset the audit profession regulator CA Institute, which sought a re-think on the same.

The advance limit for mandatory bank branch audit was earlier pegged at ₹ 6 crore for 2011-12.

From 2006 to 2010-11, the threshold limit for bank branch statutory audit was pegged at advances of ₹ 3 crore.

With the BJP gaining ‘absolute majority’ in the recent general elections, the CA Institute has renewed its attempts to get the bank branch audit norms changed.

The contention of the CA Institute members’ are that banks are guided by their overall aggregate exposure in branches with advances of below ₹ 20 crore and feel that it may not be material enough to warrant a statutory audit every year.

“They (banks) look at the aggregate picture and contend that such branches account for only say 15-16 percent of the bank’s total advances. But what they don’t realise is the risk factor. If there is increased NPA in such branches, the entire profit of a bank in a financial year could get wiped out”, a chartered accountant said.

Rather than only looking at “materiality” in terms of advances, the risk factor also needs to be considered by the banks and banking regulator, it was pointed out.

New overseas chapters

Meanwhile, the CA Institute has decided to open new chapters in Bangkok and Vancouver.

A decision to this effect was taken at a recent council meeting of the CA Institute, Raghu said.

Link Business Line