All India Bank Employees’ Association (AIBEA) urged the Secretary, Department of Financial Services, Union Ministry of Finance to look into the reported transfer of Rs 2,026 crore from Employees’ Pension Fund to Profit & Loss Account in Punjab National Bank (PNB) as on March 31, 2017.
“We are receiving anxious queries from bank employees and retirees about the fund transfer effected to allegedly enable the bank show artificial profit,” CH Venkatachalam, General Secretary, AIBEA, wrote to the Secretary, Financial Services.
The letter quoted from item 5 of the auditor’s independent report which mentioned that: “…we draw attention to Note 6 regarding change in valuation of plan assets of long-term benefits from book value to fair value, resulting in increase in the value of plan value assets by ₹388.07 crore in respect of pension fund and by ₹53.08 crore in gratuity fund.”
Clause 11 of the balance sheet of March 31, 2017 said that: “In accordance with the AS-15, during the current quarter, while considering the fair value of plan assets relating to pension and gratuity fund being long-term assets benefits of employees, interest accrued on investments has also been taken into account as against principal amount in earlier quarters/years.”
Consequent to this, employer contribution to pension and gratuity funds representing excess of fair value of plan assets over present value obligation amounting to ₹2,026 crore has been credited to ‘Payments to and provisions for employee cost during the current quarter/year.’
“From the above and allied information, we learn that the employee cost has become negative in the last quarter of 2016-17 and the total employee cost for the year has also come down,” Venkatachalam said in the letter.
Read along with information that ₹2,026 crore has been credited to employee cost due to excess value in pension fund, it means that the amount has been taken from the pension fund to the employee cost account in the P&L account.
Since the accounting procedure was changed as on March 31, 2016, from book value to fair value, it is not clear as to why this was not adhered to in Q1, Q2 and Q3 of 2016-17 and implemented only in Q4.
The government has not appointed a Workman Employee Director in banks; so there is no scope to know what transpired while finalising the balance sheet.
“However, a nominee director of the Finance Ministry serves on the board of banks, including PNB. Hence the government should be aware of the factual position,” Venkatachalam said.