Mumbai: State Bank of India, which saw a sharp 35 per cent fall in its December net profit due to a one-time outlay towards increased salaries and pensions, said the charge will jump to around Rs 26,000 crore by March this year. The country’s largest lender on Saturday reported a sharp decline of 35 percent in its net income at Rs 9,164 crore during October-December 2023 compared to a profit of Rs 14,205 crore recorded in the corresponding period a year ago and Rs 14,330 crore earned in the previous quarter. . .
The public sector lender attributed the fall in profit to the additional provision of Rs 7,100 crore made in the reporting quarter to wages and pensions stemming from the 17 percent wage hike reached with employee unions in November last year. The revised wages are effective from November 2022.
Explaining the impact of the salary hike, Chairman Dinesh Kumar Khara said, “Out of the total provisions of Rs 7,100 crore made in the December quarter, Rs 5,400 crore is towards pensions as there were some anomalies in the way our pensions were calculated. From 2022, some of our employees got 40 percent and some got 50 percent of their last salary as pension and the matter has been sub judice ever since.
“Now there is legal clarity, we thought of clearing this immediately with this allocation of Rs 5,400 crore. Following the recent court order, we have decided to pay each of our 1.8 lakh pensioners at 50 percent. This allocation takes care of the entire stay till December 2023,” he told reporters.
This means the impact of wage hike will shave up to Rs 25,990 crore from the bank’s profit by the end of March, as the bank has already provided Rs 13,400 crore till September 2023 and another Rs 7,100 crore in the December quarter. Also, it will have to set aside Rs 5,490 crore more in the March quarter, taking the total to Rs 25,990 crore. And most of the exit is to pensions.
Khara further said that in fact the bank has set aside 10 percent every year for salary and pension arrears so far and that amounts to Rs 13,400 crore till December 2023.
Now we will have to set aside Rs 5,490 crore more for the March quarter. With that it will be business as usual, he added.
The president further said that Rs 1,700 crore out of the Rs 7,100 crore has been provided to neutralize the dearness arrears, also required after the salary hike.
He said that this Rs 1,700 crore for the pension corpus will be implemented after the government notifies it through gazette and the Reserve Bank of India approves it.
Although both are pending, we have decided to set aside the entire quantum in the December quarter itself, he added.
Salaries and other benefits of the employees of state-owned banks along with some of the oldest foreign banks like Standard Chartered Bank and HSBC, and old-generation private sector lenders like HDFC, ICICI, Federal Bank, among others, are decided by the industry. lobby IBA under a salary settlement that has a five-year tenure.
Accordingly, the latest wage increase of 17 percent, up from 14 percent in the previous settlement, took effect from November 1, 2022 and was announced in early December 2023. The IBA said the impact on public sector lenders will be close Rs 13,000 crore for salaries.
The overhaul will benefit more than 9 lakh employees and officers. Of the total, 3.8 lakh are with state-owned banks and over 2 lakh with the SBI. The adjustment will take effect from November 1, 2022 and will last for up to five years.
To calculate the new pay scales, the dearness corresponding to 8,088 points will be merged with the basic pay from October 31, 2022. Additionally, a charge of 3 percent will be added, totaling Rs 1,795 crore.
The distribution of the annual salary increase between workers and officers will be determined separately based on the breakdown of establishment expenses for the fiscal year 2021-22.
While the pension upgrade requirement for all retirees is still under discussion, it has been agreed that a one-time exgratia amount will be considered along with the pension for pensioners and family pensioners from October 31, 2022.