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business | IST

Pension payout: SBI says revised guidelines to increase cost

The government recently decided to hike pension payouts to family members of deceased public sector undertaking (PSU) bankers. The contribution to NPS will also go up. A CLSA report on the same says that this could keep the cost-to-income ratio sticky. Om Prakash Mishra, deputy managing director and corporate development officer of State Bank of India (SBI), discussed this.

The government recently decided to hike pension payouts to family members of deceased public sector undertaking (PSU) bankers. The contribution to NPS will also go up. A CLSA report on the same says that this could keep the cost-to-income ratio sticky. Om Prakash Mishra, deputy managing director and corporate development officer of State Bank of India (SBI), discussed this.
Currently, the bank is paying family pension in three slabs at the rate of 15 percent, 20 percent and 30 percent. “The revised guidelines will enhance our pension outlay,” he said.
As of now, there are around 70,000 family pensioners and out of that, 95 percent or around 67,000 belong to the 15 percent category. All these families will get enhanced pension. “It will increase the pension payout by around Rs 50 crore every month. Since it is effective from April 2021, the total arrears payment will be around Rs 300 crore,” he further mentioned.
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Secondly, the increased contribution in NPS is also looming large for the banks. The increase in rate has been from 10 percent to 14 percent. “Currently, we have 1,23,000 employees under the new NPS and this increased contribution will lead to an enhanced cost of around Rs 30 crore every month, effective from November 11, 2020. So total NPS outlay will be around Rs 240 crore,” he said.
The cost-to-income ratio has been a challenge for the bank. “It is around 53 percent as of now. Staff cost is slightly on the higher side and is more rigid. It is very difficult to reduce staff cost,” he stated.
All of this put together, the bank’s incremental payout due to revision in NPS and other employee costs is at Rs 100 crore per month.
Mishra also believes that staff cost controlling will be a challenge after the increase in payouts.
For the full interview, watch the accompanying video.