Increase in outflow of funds owing to pension and gratuity is causing worry for banks as they feel this would hurt their profit figures this fiscal.

It has thus been decided by CEOs of big commercial banks to approach the RBI as well as the Institute of Chartered Accountants of India (ICAI) so that there is some relaxation in accounting norms which would enable to loosen the liability arising out of pension and gratuity.

Banks are tensed that apart from pension funds which alone would be costing around Rs 6000 crores as per the wage negotiation with employees, they will have to arrange for gratuity funds too which had not been considered earlier.

“Pension and gratuity outgo is estimated at `10,000 crore, which will definitely take a toll on our bottomline,” said the CMD of a PSU bank who attended the meeting. “In fact, some of us fear the pension liabilities would be much more than estimated at the time of negotiating the wages.”

In the year 2002, when voluntary retirement schemes (VRS) was introduced by PSU Banks, RBI had allowed banks to amortise the liabilities for five years, wherein the bank deducts one-fifth of the payment above the line for the next five years. “This, however, may not be possible this time. The current rules set by RBI and ICAI would make it difficult to amortise the pension and gratuity liabilities,” pointed out a banker.

If there is no relaxation received by banks, their profits will decline and reserves would also come down. This means the capital adequacy ratio of banks will also decline a lot.