The Reserve Bank of India issued prudential guidance for Regional Rural Banks (RRBs) on the accounting and capital treatment of the additional pension liability arising from implementing the pension scheme with effect from 1 November 1993. It permits RRBs to spread the profit and loss impact of the pension revision over multiple years where absorbing the increased liability in a single year is difficult. RRBs must fully recognise the pension liability in line with applicable accounting standards. If the pension revision expenditure is not fully charged to the Profit and Loss Account in financial year 2024-25, it may be amortised over a period not exceeding five years beginning with the financial year ending 31 March 2025, subject to expensing at least 20% of the total pension liability each year. Disclosures in the Notes to Accounts must cover the accounting policy, the unamortised expenditure, and the consequential net profit if the unamortised amount had been fully recognised; the unamortised pension expenditure will not be reduced from Tier 1 Capital. The circular applies to all RRBs with effect from financial year 2024-25, and the Reserve Bank of India (Financial Statements - Presentation and Disclosures) Directions, 2021 will be updated to reflect these changes.
Reserve Bank of India 2025-03-20
Reserve Bank of India allows Regional Rural Banks to amortise additional pension revision costs over up to five years from FY 2024-25
The Reserve Bank of India issued guidance for Regional Rural Banks on accounting and capital treatment of pension liabilities from the scheme effective 1 November 1993. RRBs may amortise the pension revision expenditure over up to five years, starting financial year 2024-25, with at least 20% expensed annually. Unamortised pension expenditure will not be deducted from Tier 1 Capital, and disclosures must include accounting policy and net profit implications.