The wage revision for employees/Officers of PSU Banks and Insurance Companies were completed in 2010-11. The employee/officers of Banks got nearly 17.5% wage hike and the Insurance employees/ officers got 25 % wage hike with retrospective effect from August 2007. The employees of PSU banks got one chance to opt for Pension instead of contributory PF. This in effect would result in a huge provisioning for employee benefits in their accounts for the year 2010-11 of these banks and Insurance companies. The upper limit of Gratuity was increased from Rs. 3.5 lakh to Rs. 10 lakh after a long time. This invariably increases the liabilities of these PSU banks and Insurance Companies at about Rs. 55000 crore. Infact, ICRA a leading rating agency had estimated that the expenditure liability for these PSU banks alone would be around 10 to 20 per cent of their tier I capital as on 31 March 2010. Which means it may be around 5o to 53 thousand crores. This provision of expenditure in one year would affect the profitablity of these banks and Govt cannot get huge dividend and Taxes. RBI by way of its circular 9 February 2011 came to the rescue of these banks by allowing the banks to provide one fifth of this liability in their accounts which violates the very principles of Accounting Standard 15. BY this way take for example, the Indian Bank's Profit after Tax was taken as Rs. 1714 crore for the financial year 2010-11 as against Rs. 1555 crore during previous year. The Bank carried forward the non- provisions to the extent of Rs. 875 crore for which the Govt. is getting Rs. 262 crore by way of tax. AT the same time is going to get Dividend of nearly Rs. 298 crore and dividend tax of Rs. 53 crore appx. Apart from this, other share holders are going to get dividend of Rs. 55 crore.Thus the GOVT is going to get more than Rs. 610 crore by way of taxes and dividends but the employees were denied in the immediate future Rs. 875 crore. At best RBI could have directed that till such time the employee liabilites were discharged in full, 'No dividend" to be paid out of profits. Otherwise, if the Banks want to pay dividend, then let them fully provide for expense liabilities. As some argued that this wage revision is nearly 18 to 20 per cent, the annual incremental liabilities would be around 6 per cent only. So the orders of RBI is not wrong. But, this order violates the Generally Accepted Accounting Principles of India.and it is funny that a regulator is ordering to violate the Accounting Standards. Actually, this wage revision occurs once is 5 years in some cases and once in 10 years in most cases. More over, the raising of gratuity limit will definitely affect all the companies in India. So the special treatment given to these PSU banks is not correct.
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