Ahead of the festive season, the Reserve Bank of India (RBI) has allowed banks to amortise the additional liability on account of revision in family pension over five years beginning 2021-22.
In its latest notification, the RBI said that the liability for enhancement of family pension shall be fully recognised as per applicable accounting standards after examining various representations of the Indian Banks’ Association.
Earlier, the Indian Banks’ Association (IBA) had approached the RBI for the amortisation of the increased expenditure, resulting from the revision in family pension for employees of its member banks covered under the 11th Bipartite Settlement and Joint Note dated November 11, 2020.
The additional liability on account of revision in family pension consequent to the aforementioned settlement should be fully recognised and charged to the Profit and Loss Account in the current financial year.
However, IBA had expressed that it would be difficult for some banks to absorb the large amount involved in a single year.
The RBI has categorically stated that the appropriate disclosures of the accounting policy followed in this regard shall be made in the ‘Notes to Accounts’ to the financial statements.
“The Notes to Accounts shall also disclose the amount of unamortised expenditure and the consequential net profit if the unamortised expenditure had been fully recognised in the Profit & Loss Account,” RBI’s circular read.