A pension is a fund into which a sum of money is added during an employee’s employment years and from which payments are drawn to support the person’s retirement from work in the form of periodic payments.


Commutation means a lump sum payment in lieu of periodic payments of pension. In such a case, the amount of pension will be lower than the amount of pension without any commutation.

Dearness Relief

DR is a part of pension received by the pensioner. It is reviewed to factor in the inflationary trends in the economy.

Disbursement of Pension

Payment of pension to retired government employees, including payment of basic pension, increased Dearness Relief (DR), and other benefits as and when announced by the governments, is governed by the relevant schemes prepared by concerned Ministries/Departments of the Government of India and State Governments.

Presently, disbursement of pension is being done through CPPC which has enabled the bank to have a centralized and easily accessible data basis of pensioners, so that all the matters including those relating to transfer of pension accounts from one branch to another, from one to location to another or even one bank to another are managed easily.

Centralized Pension Processing Centre came into operation in our bank in April 2009 (as per the recommendation by Prabhakar Rao Committee). All master data pertaining to PPOs of central government and state government are uploaded in the CPPC master. Based on the data given by the branches, CPPC is disbursing pension to pensioners.


Government orders on websites

Government has decided to discontinue the procedure of forwarding government orders in respect of dearness relief etc. to pension paying agency banks and issued certain instructions as given below:

  • All agency banks are permitted to act on the instructions received through post, fax, and emails or by accessing information from the relevant website in respect of dearness relief, pension payment and other benefits to the pensioners.
  • All agency banks should instruct their pension paying branches accordingly.
  • All agency banks should follow all the guidelines/instructions contained in various notifications issued by State or Central Government and act immediately without waiting for any further instructions from RBI.

Pension disbursement by agency banks

Pension amount to be credited in the accounts of the pensioners as per the instructions given by Pension Paying Authorities.

Recovery of excess/wrong payment.

(Pension Payment to Central/Civil/Defense/Railways pensioners)

  1. Branch should immediately adjust any excess or wrong payment to a pensioner against the amount available to the credit in the pensioner’s account to the extent possible including lump sum arrears payment.
  1. The pensioner should be asked to pay the rest amount of overpayment subsequently if the entire overpayment has not been recovered instantly.
  2. The same may be adjusted from the future pension payments in installments, if the pensioner expresses his inability to pay the amount paid in excess to him. 1/3rd of net (Pension + Relief) payable each month may be recovered unless the pensioner concerned gives consent in writing to pay a higher instalment amount.
  3. If overpayment is not possible to recover due to pensioner’s death or discontinuance of pension, action has to be taken as per the letter of undertaking given by the pensioner under the scheme.
  4. The pensioner may also be advised about the details of overpayment/wrong payment and mode of its recovery.

Refund of excess pension payment to Government

Any excess / overpayment made to the pensioners due to error on the part of the agency bank, should be immediately credited to the government account in lump sum without waiting for recovery from the pensioners.

If it is due to errors committed by the government, banks may take up the matter with the respective Government Department for a quick resolution of the matter.

Withdrawal of pension/family pension by old/ sick/ disabled/ incapacitated pensioners


  • Pensioner who is too ill to sign a cheque/unable to be physically present in the bank.
  • Pensioner who is not only unable to be physically present in the bank but also not even able to put his/her thumb impression on the cheque/withdrawal form due to certain physical defect/incapacity.

Measures Suggested:

Thumb or toe impression of the old/sick pensioner is obtained and it should be identified by two independent witnesses known to the bank, one of whom should be a responsible bank official.

Where even thumb/ toe impression is not possible and also the pensioner is not able to be physically present in the bank, a mark can be obtained on the cheque/withdrawal form, which should be identified by two independent witnesses, one of whom should be a responsible bank official.

Agency banks in this regard should:

  • Instruct their branches to display the instructions on their notice board
  • Implement strictly the instructions issued by RBI.

Reimbursement of pension payments

Link branches of agency banks may submit reimbursement claims to the Reserve Bank of India, Central Accounts Section, Nagpur / Government Banking Division at Regional Office for Central/State Government pension payments.

Continuation of either or survivor pension account after death of pensioner

  1. Spouse (Family pensioner) is permitted to opt for an existing joint account for credit of family pension.
  2. Banks should not insist on opening a new account when the spouse is the survivor and having a joint account with the pensioner and in whose favour an authorisation for payment of family pension exists in the Pension Payment Order (PPO).

Life Certificate- Issuance of Acknowledgement

  • Agency banks should issue a system generated acknowledgement for submission of life certificate.
  • This practice would serve the twin purpose of acknowledgement as well as real time updating of records in cbs.

Single Window System for reimbursement of Pension Payments

Single Window System was introduced to facilitate prompt settlement of reimbursement claims and reconciliation. The underlying objective is to make each pension paying bank responsible in its own right to effect settlement without the intervention of RBI Offices or SBI (at District Headquarters) in the process eliminating cause of delay in reimbursement claims.

Customer Service

Recommendations of the Prabhakar Rao Committee relating to pension payments are to be adhered to.

Agency banks should appoint one/two nodal officers at each Region/Zone for monitoring the resolution of grievances of pensioners on regular basis and the GM/CGM concerned should review the position at monthly intervals

At locations outside the CPPCs, there should be designated nodal officers for pension related complaints and they should hold regular meetings at different locations in their jurisdiction on the lines of Pension Adalat.

Each bank should establish a toll free dedicated pension line to redress the complaints.

Pension paying banks should compensate the pensioner for delay in crediting pension/ arrears thereof at a fixed interest rate of 8 per cent per annum for the delay after the due date of payment and the compensation shall be credited to the pensioner’s account automatically without any claim from the pensioner on the same day when the bank affords credit for revised pension/ pension arrears, in respect of all delayed pension payments made since October 1, 2008.

Mechanism should be there to obtain immediately the copies of pension orders from the pension paying authorities directly without waiting for receipt of instructions from the Reserve Bank of India to avoid any delay to the pensioners.

Agency bank’s branch should continue to be a point of referral for the pensioner. Branch should guide and assist the pensioners in all their dealings with the bank.

Suitable arrangements should be made to place the arithmetic and other details on the web or through branches to the pensioners.

Internal auditors/inspectors also should take note of the quality of customer service when they visit the branches.

Checklist relating to Government Business (pension related) for internal/concurrent audit

Internal inspections should assess branch performance in servicing pensioner customers. In this regard, the following may be ensured:

A specific questionnaire covering all aspects of pension payment may be devised for use during inspection of pension paying branches.

Inspecting officers may also, during inspections, call up pensioners at random and enquire about their satisfaction with pension-related services.

A detailed check-list relating to pension payments/ government business may be given by banks to internal auditors/inspectors in order to adhere to the recommendations of the Prabhakar Rao Committee, constituted by the Government of India, relating to pension payments/government business.

These include the following:

  1. Whether there is delay in payment of pension, revision of pension, revision in dearness relief etc.
  2. Whether the branch manager has structured interaction with a cross section of pensioners serviced at the branch on quarterly basis, where the number of pensioners of all governments and departments exceeds a fixed number, say, 100 or 200.
  3. Whether nominations have been obtained for all pension accounts.
  4. Whether pension accounts have been converted into joint accounts wherever applicable.
  5. Whether the bank branch has an effective complaint redressal mechanism and the complaints of pensioners are attended promptly and their grievances redressed expeditiously.
  6. Whether the pension is credited to the pensioner’s account during the last four working days of the month except for the month of March for which pension is to be credited on or after the first working day of April.
  7. Whether the pension paying branch obtains Life Certificate/ Non-employment certificate/Employment Certificate from the pensioners in the month of November every year.
  8. Whether pension paying branches deduct income tax at source from pension payments wherever applicable.
  9. Whether paper tokens in acknowledgement of cheques presented are invariably given by the tax collecting branches.
  10. Whether the challans are stamped giving the bank’s BSR code and Challan Identification Number (CIN) clearly.
  11. Whether the stamped challans are kept in the custody of bank’s staff and handed over to the concerned taxpayer only on production of the paper token.

Agency Commission

All claims for agency commission by banks in respect of pension payments must be accompanied by a certificate from ED/CGM in charge of government business that there are no pension arrears to be credited/delays in crediting regular pension/arrears thereof.