COMPENSATION FOR WRONG PAYMENT OF FAMILY PENSION

COMPENSATION  FOR  AN  ERRONEOUS  AND  DELAYED  PAYMENT

OF  ORDINARY  FAMILY  PENSION  AND  ARREARS.

It is very common that the banks simply pay a Sepoy’s family pension to a Subedar’s wife.  Because, neither the bank nor the family pensioner is aware of the various rank structure of the Army, Navy, Air Force and the different rates of pension and family pension fixed for various ranks.

The situation has become worst after introducing the centralized pension payment system in almost all banks.  The position continues till such time a pension audit points out during a random verification of pension payments.

Due to these types of erroneous payments for a prolonged period, sometimes more than 10 to 15 years, the arrears amounting to more than 5 to 7 lacs are paid without a single word of regret or any compensation from the banks.  The bank officials, who are responsible for correct payment of pension are not at all made accountable for this lapse.  After a long silence on the subject, the RBI, recently issued instructions to all pension paying banks to pay compensation w.e.f. 01.10.2008 to all such delayed pension and arrears payments automatically without waiting for any claim from the pensioner. It is really a welcome step.

Now let us see how much arrears and compensation a wife of a Subedar Group ‘B’ will get if she was treated like a Sepoy’s wife and paid only Rs.3500 p.m. instead of Rs.4770 w.e.f. 1.1.2006.

The Correct rate of ordinary family pension payable to the wife of

a Subedar Gp.’B’ w,e,f, 1,1,2006 is ..       ..          ..          ..          .. ..Rs.4770

    

The rate of family pension paid by the bank is      ..          ..          ..    ..Rs.3500

The monthly reduction in the basic pension is       ..          ..          ..    ..Rs.1270

Now the total arrears of difference in pension payable from 1.1.2006

To 30.9.2008 for 33 months along with Dearness Relief             ..     ..Rs.44729

Since the bank has to pay compensation from 1.10.2008, we have to arrive at the amount due by 30.9.2008, but not paid.  Accordingly the unpaid amount of Rs.44729 will have to be paid with compensation @ 10% (Bank rate +2% penalty) till the date of payment.  Further the monthly reduction @ Rs.1270 with D.R. continues.  Therefore, Recurring Deposit rate of interest has to be paid as compensation from 1.10.2008 to till the date of payment of total arrears for the period from 1.1.2006.

In this case if the bank pays the arrears of corrected pension by 01.2.2011 the compensation payable will be calculated as follows:-

Arrears of correct pension payable from 1.1.2006 to

30.9.2008 with D.R.   ..          ..          ..          ..          ..      Rs.44,729

Compensation payable @ 10% from 1.10.2008 to

31.1.2011 for 28 months.        ..          ..          ..          ..     Rs.4,473

RD rate of interest (10%) from 1.10.2008 to

31.1.2011 for monthly reduction of Rs.1270 for

28 months.                  ..          ..          ..          ..          ..     Rs.4,638

Total compensation payable    ..          ..          ..          ..     Rs.9,111

The RBI had justified payment of this compensation without waiting for any claim from the pensioner.  There is no question of raising any dispute over payment of this compensation by the Banks on this issue.

The banks should accept the instructions given by the RBI in the right spirit and improve their performance, if they are really interested to avoid payment of this compensation.

Let us hope that this master circular of RBI dt.July 01, 2010 will bring in improvement in the pension payment system.