WEEKEND LIGHTER: Review Pension System
(A weekly recap of Blog Posts and responses in the media by
M G Warrier, posted at the weekend @www.warriersblog.com)
July 28, 2017
Section IV: Essence of Karma Yoga
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Review Indian Pension System
Ramanath Nakhate’s letter captioned “United fight for pension” (Business Standard, July 24) gives deep insight into the plight of a section of pensioners who retired from some public sector institutions. The reasons for GOI and organizations like LIC, RBI and PSBs in which pension schemes had been introduced during 1990’s lending a deaf ear to genuine demands for pension revision may be different from those being shared in public. To understand that, one may have to first have a look at the present status of pension scheme applicable to central government employees.
By an executive order issued in December 2003, GOI successfully divided central government employees into three classes for the purpose of pension benefits:
(i)                          Employees who were in service as on December 31, 2003, who will continue to enjoy the benefits of ‘Defined Benefit Pension Scheme’ which was in existence on that day, for life (Assuming the employee who joined on December 31, 2003 at the age of 25 may retire in 2038 and assuming the person live up to the age of 80, the pension scheme will remain in force till the year 2058).
(ii)                       Defence Personnel: Serving and new defence personnel (joining after December 31, 2003) will continue to enjoy the benefit of Defined Benefit Pension Scheme.
(iii)                    Central government employees joining service on or after January 1, 2004 will be covered by a “Defined Contribution-based pension scheme” called NPS (New Pension Scheme, later rechristened as ‘National Pension System’) where employees’ contribution of 10 per cent of salary will be augmented with a matching contribution of 10 percent by the employer. NPS differs from the old Contributory Provident Fund only in regard to certain details in regard to provisions relating to investment/fund management/withdrawal.
The reason given for introduction of NPS  was rising pension liabilities. The pension liability may start tapering only after a few more decades. All these call for a comprehensive review of the Indian Pension System to make it capable of ensuring reasonable retirement benefits to all who are in regular employment. NPS is no substitute for the pension scheme it has replaced. Pensioners’ demand for periodic upward revision factoring in the changes in costs and living conditions is genuine.
M G Warrier, Mumbai
Recent responses
IBC, Reinventing the wheel?
This refers to Somasekhar Sundaresan’s article “Last resort shouldn’t turn into first choice” (Business Standard, Without Contempt, July 27). Closely following filing of a petition in the Gujarat High Court by Essar opposing insolvency proceedings initiated by banks, media and analysts became more liberal in expressing views that were not much supportive of the current efforts of GOI and RBI to use the new instrument of Insolvency and Bankruptcy Code to handle Banking System’s stressed assets.
Let us not forget that NCLT was not conceived as a magic solution for NPAs, but was meant to strengthen the existing mechanisms to supervise and monitor banking business. All the existing arrangements including appraisal of prospective borrowers, online monitoring of projects financed and efforts for timely recovery will, hopefully, continue with more vigour and professionalism.
RBI is participating in the ‘Insolvency Resolution’ process, not by choice. Media converted Gujarat High Court’s observation that ‘those with professional degrees may not necessarily be competent to run companies’. That could have been skipped as an ‘innocent oversight’(to borrow a phrase from RBI deputy governor S S Mundra) in expressing their Lordship’s views, as, when you point an accusing finger to an unspecified target, all other fingers go in the opposite direction!
Indian financial sector is going through a transition and as the responsibility of other sectors for the chaotic situation gets identified and fixed, the health of Indian Economy will be restored and economic growth will not remain just a jugglery of numbers. If banking system has ‘stressed assets’ of a level higher than the tolerance limits, there are individuals and corporates who have gained in the bargain, who are making a last effort to get away by maligning the regulator and supervisor of banks. This time around, ‘WE THE PEOPLE’ are more vigilant and are watching the game closely.
M G Warrier, Mumbai
 “Rest” and trust
Reserve Bank of India (RBI), through a circular dated July 27, 2017 has raised the ‘rest’ period for statutory central auditors(SCAs) of banks to 6 years”. The grounds for longer rest period for SCAs given in the RBI circular more than justifies the enhancement of rest period for  SCAs from two years prevailing since 2001 to six years. They are also suggestive of unethical practices being followed by professionals and banks in tandem.
Let us concede that regulatory oversight alone cannot ensure best practices of governance in organizations which manage huge resources including public funds. And diminishing public trust in professionals is a matter for worry not only for the government or regulators, but for the common man and the taxpayer. In the given case, even the possibility of lateral movement of individuals from one CA firm to another can reduce the impact of forced ‘rest’ periods. It is difficult to build trust and honest behavior through statutes or directions.
In this context, the only option left is strict self-regulation by professional bodies. The institute of CAs, RBI and banks should expose unethical approaches by individual CA firms and their employees and where proved guilty the firms/individuals should be punished. If there are legal hurdles, GOI need to come to help them out.
M G Warrier, Mumbai
RBI’s vision
RBI Deputy Governor Viral Acharya’s observation that “NPAs take precedence over rate cut”, on the sidelines of the Delhi Economists Conclave last weekend confirms that there is continuity and consistency in the thought process of India’s central bank. It is comforting to see that RBI’s priorities remain undisturbed despite frequent changes at the helm.
Recent years have seen RBI getting the necessary policy support from GOI in performing its mandated roles efficiently. We need to see the evolution of MPC (including the recent guidance to members of MPC on secrecy issues) and the deft handling of issues relating to management of banking system’s stressed assets as clear evidence of a change for the better in the GOI-RBI engagement.
While pressure will continue for rate cuts and other measures to make credit cheaper, so long as RBI is able to explain the rationale for its policy stances, hopefully, there will not be threats of ‘walking alone’ by the finance minister or a need for the RBI governor to opt to fall sick. This is the comfort one feels from the body language of Arun Jaitley which accommodates professionalism in public sector organizations.
With his refusal to sugar-coat or camouflage his clarity of perception to make others happy, Dr Acharya, who has RBI’s priorities rightly set in his mind, promises to make good what RBI lost by the return of Dr Raghuram Rajan to academia.
M G Warrier, Mumbai
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Leisure, Faith
Essence of Karma Yoga*
A major section of Gita teaching deals with the dual role of an individual that makes him responsible to his duties to the world around him as well as to those he owes himself. Krishna explains that the path of action or karma when followed in the right spirit can lead one directly to salvation and that for a majority, it is more suitable than jnana, bhakti or yoga.
In a discourse, Sri Jamadagni drew attention to how Krishna brings out the subtle and delicate issues that are likely to arise in fulfilling one’s social and individual commitments.
Each one with the immortal self within the perishable body has to follow his swadharma, an internal subtle law governing him and the universe. Our action has to be the result of our nature. Often, one is caught in the grip of prevalent ideas at a particular point of time and the forces of tradition as well.
Arjuna typifies this confused state when he wishes to abandon the battle to seek solace in retreat from the world. He does not want to fight his own kith and kin, and is obviously being overruled by conscience and inner instinct. Krishna exhorts each one to understand that an individual is a part of the entire universe and is responsible for its upkeep; at the same time, he cannot ignore his own spiritual destiny, to get liberated through sadana. Each one has to figure out what is action, or inaction and wrong action and should never give up one’s duties on any ground. Arjuna as a Kshatriya warrior is bound by his karma to fight for the upkeep of dharma.
Doing one’s duty as an ordained commitment and offering the act and its fruits to the Lord is the essence of karma yoga and it leads one to the same end that a yogi or a sanyasi or a bhakta achieves.
*Source:The Hindu, Faith column
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