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State Bank of India has provisioned Rs.20,500 amount till now for Salary Increase, DA hike and Pension Updation


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State Bank of India (SBI) witnessed a significant 35% decline in its net profit for the December quarter. This drop was primarily due to a one-time expense related to increased salaries and pensions.

Impact on Net Profit:

SBI reported a net income of ₹9,164 crore for October-December 2023, down from ₹14,205 crore a year ago. The bank attributed this decline to an additional provision of ₹7,100 crore made in the quarter for salaries and pensions.

Wage Hike Settlement Details:

The decrease in profit is linked to a 17% wage hike settlement reached with employee unions in November 2022. The revised wages became effective from November 2022.

Pension Provision and Legal Clarity:

Chairman Dinesh Kumar Khara clarified that ₹5,400 crore of the ₹7,100 crore provision was for pensions, resolving anomalies in their calculation. A recent court order led to a decision to pay all 1.8 lakh pensioners at 50%, addressing the backlog until December 2023.

Future Impact on Profit:

The total impact of the wage hike is expected to be ₹25,990 crore by March. The bank has already provisioned ₹13,400 crore till September 2023 and an additional ₹7,100 crore in the December quarter. An extra ₹5,490 crore will be set aside in the March quarter.

Chairman’s Statement on Business as Usual:

Chairman Khara emphasized that the bank traditionally sets aside 10% each year for salary and pension arrears. With the additional provision in March, he assures that it will be “business as usual.”

Provision for Dearness Allowance Arrears:

Out of the ₹7,100 crore provision, ₹1,700 crore is allocated for neutralizing dearness allowance arrears. This will be implemented once the government notifies it through the gazette, and RBI approves it.

Wage Hike Impact on Banking Industry:

Salaries and benefits for state-owned banks and some foreign and private sector banks are decided by the Industry lobby IBA under a five-year wage settlement. The recent 17% wage hike is estimated to have an impact of close to ₹13,000 crore on public sector lenders.

Wage Hike Details and Duration:

The 17% wage hike, effective from November 1, 2022, will benefit over 9 lakh employees and officers, including 2 lakh with SBI. The adjustment will span up to five years.

Additional Considerations:

While the demand for pension updating is under discussion, it is agreed that a one-time ex-gratia amount will be considered for pensioners and family pensioners as of October 31, 2022.

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