OERS
Introduction
RBI introduced the above scheme on August 16, 2003.
As per page201-02ofthe AnnualReport for the year 2003-04 tabled in Parliament,the Scheme (OERS) was introduced on the frame work of the Voluntary Retirement Scheme (VRS) for Public Sector Banks.
Payments to OERS Optees:
1. Lump sum Ex-gratia
lesser of the following:
{Basic Pay + Dearness Allowance (D.A.)} of 2 months for each year of service rendered
OR
{Basic Pay + Dearness Allowance (D.A.)} for the remaining months of service
And
2. Normal statutory retirement Benefits like pension and consequent commutation, gratuity etc..
Income Tax:
- Payment of ex-gratia was subjected to deduction of tax at source, thus denying the Optees of benefits u/s 10(10C) and u/s 89 of Income Tax Act, although the Scheme met the conditions specified in the Income Tax Act section 10(10C).
Why the RBI deducted tax at source?
- In a press article in The Economic Times (31-1-2005) RBI spokesman said:
“Ours was an OERS which is different from VRS. We did not pay any lump sum amount.” - However, the Administrative circular introducing the scheme clearly stated that ex-gratia is a lump sum payment.
The bank has further accepted ex-gratia as a one time lump sum payment in correspondence with the Optees regarding the revision of ex-gratia on account of revision of Basic Pay.
Why the OERS was introduced?
Annual Report cites"Technological upgradation towards streamlining the work" as one of the reasons.In fact, massive computerization of currency management,outsourcing, and delegating the Bank's traditional functions to other banks, lead to big chunk of surplus staff and redundant workforce. To get rid of the surplus staff, Bank introduced OERS.
The scheme evoked a good response from the employees and 4,468 applications,(15.8% of the workforce as on June 30, 2003) were accepted under the scheme. All of them were relieved from service.
OERS indicates a concentration in the age group of 54 to 57 (Chart XIV.1).
Eligibility Criteria:
25 years of service + 50 years of age as on August 1, 2003.
As per the Annual Report the majority of the applicants were in the age group of 54-57. Most of them applied on grounds of poor health and personal reasons.