The Ministry of Labour and Employment has clarified the position on the enhancement of the gratuity ceiling for bank employees from ₹20 lakh to ₹25 lakh. The clarification was issued in response to a letter from the National Confederation of Bank Employees (NCBE), which had requested an increase in the gratuity ceiling for bank employees in line with central government employees.
Gratuity is a lump-sum financial benefit paid by an employer to an employee as a token of appreciation for long-term service. In India, it is governed by the Payment of Gratuity Act, 1972, and is given when an employee retires, resigns, or leaves the company after completing a minimum period of service.
According to the letter dated August 3, 2026, the Code on Social Security, 2020 came into force on November 21, 2025. With this, the Payment of Gratuity Act, 1972 was repealed and its provisions were incorporated into Chapter V of the Social Security Code, 2020. The government stated that the current statutory gratuity ceiling is ₹20 lakh.
However, the government has also highlighted an important provision under Section 53(5) of the Code on Social Security, 2020. This provision protects an employee’s right to receive better gratuity benefits under an award, agreement, settlement or contract with the employer.
This means that if a bank employee is covered by an agreement, settlement or other applicable arrangement that provides gratuity benefits above the statutory limit, the employee can receive the higher benefit. The government has specifically clarified that such an enhanced gratuity ceiling can be provided without requiring an amendment to the Social Security Code.
Therefore, while the statutory gratuity ceiling currently remains ₹20 lakh, bank employees can receive a higher gratuity amount if such a benefit is provided under the applicable agreement, settlement or contract with the employer.
The clarification is significant for bank employees because the demand for increasing the gratuity ceiling to ₹25 lakh has been raised by bank employee organisations. The government response indicates that an enhanced gratuity benefit can be provided through the applicable agreement or settlement even though the statutory ceiling under the Code remains ₹20 lakh.
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