Regional Rural Banks Get 5-Year Window to Amortise Pension Dues: RBI [Read Circular]
RBI allows Regional Rural Banks to spread additional pension costs over five years to ease financial burden
![Regional Rural Banks Get 5-Year Window to Amortise Pension Dues: RBI [Read Circular]](https://www.taxscan.in/wp-content/uploads/2025/03/Regional-Rural-Banks-Window-Amortise-Pension-Dues-RBI-taxscan.jpg "Regional Rural Banks Get 5-Year Window to Amortise Pension Dues: RBI [Read Circular]")
The Reserve Bank of India (RBI) has allowed Regional Rural Banks (RRBs) to spread out their extra pension costs over a period of five years, starting from the financial year 2024–25. This decision comes after RRBs were asked to apply the pension scheme to employees with effect from November 1, 1993, which led to a big increase in their pension liability (the money they owe to employees...
The Reserve Bank of India (RBI) has allowed Regional Rural Banks (RRBs) to spread out their extra pension costs over a period of five years, starting from the financial year 2024–25.
This decision comes after RRBs were asked to apply the pension scheme to employees with effect from November 1, 1993, which led to a big increase in their pension liability (the money they owe to employees for pensions).
Since paying the full amount in one year would be difficult, the RBI has said:
Read More: Former RBI Governor C Rangarajan Pushes for State Income Tax to Boost Revenue
- Banks must record the full pension amount in their books as required by accounting rules.
- They can spread the actual cost over five years but must pay at least 20% each year.
- Banks must clearly explain this in their financial reports, including how much of the amount is still unpaid and how profits would change if they paid it all at once.
- The unpaid pension cost won’t affect the bank’s Tier 1 capital, which means it won’t hurt their financial strength in the eyes of regulators.
GST Litigation Secrets – Winning Strategies from Real Cases!, Click Here
Earlier, in 2019, RRBs were allowed to spread pension costs under the 2018 pension scheme over five years. But since the pension scheme was applied from 1993, the liability has become much bigger.
Read More: Milk Chilling not ‘Agricultural Produce’, Liable for Service Tax: CESTAT [Read Order]
The RBI will also update its financial reporting rules to include this change. This move is expected to help RRBs manage their finances better while staying transparent and compliant with the rules.
Who this applies to:
- The circular applies to all Regional Rural Banks (RRBs) starting from the financial year 2024–25.
- The RBI also noted that the Reserve Bank of India (Financial Statements - Presentation and Disclosures) Directions, 2021 will be updated to include these changes.
To Read the full text of the Circular CLICK HERE
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
