RRBs get five more years to amortise additional pension liabilities

The Reserve Bank of India (RBI) today said regional rural banks (RRBs) will get five more years, beginning with the current financial year (FY25), to amortise the additional expenditure in light of the revision in pensions. The extra time has been granted due to the difficulties expressed in absorbing the increased liability in a single year.

 

RRBs were earlier permitted to amortise their liability on account of the Employee Pension Scheme 2018 over five years, beginning with the financial year ending March 31, 2019. RRBs are now required to implement the pension scheme with effect from November 1, 1993.

   

The expenditure, if not fully charged to the profit and loss account in FY25, may be amortised over a period not exceeding five years, beginning with the financial year ending March 31, 2025. RRBs will have to make provision for at least 20 per cent of the total pension liability every year.

 

They must fully recognise the liability on account of the applicability of the pension scheme as per the applicable accounting standards, RBI said in a notification.

 

They should disclose the accounting policy followed in this regard in the ‘Notes to Accounts’ to the financial statements.

 

Banks should disclose the amount of unamortised expenditure and the consequential net profit if the unamortised expenditure has been fully recognised in the profit and loss account. Pension-related unamortised expenditure would not be reduced from Tier-I capital of the RRBs, RBI said.