Reserve Bank of India amends agency bank pension rules to tighten recovery of excess payments

The Reserve Bank of India has issued first amendments to its April 2026 directions on disbursement of government pension by agency banks, replacing the chapter on recovery and refund of excess pension payments. The changes require banks to avoid recovering excess amounts from a government pensioner without the pensioner’s knowledge and consent or a prior notice, and to ensure any recovery follows applicable service rules. The amendments took effect from the date of issue. For excess or wrongful pension payments caused by bank-attributed errors, such as clerical mistakes, miscalculations or incorrect application of instructions, the full amount must be credited back to the government account in lump sum as soon as the error is detected. Banks must also adopt a board-approved recovery policy, including a cut-off period beyond which no recovery will be made, backed by operating procedures and monitoring controls. Annex III requires prompt written notice to the pensioner, allows recovery through a surplus account balance above a protected minimum, deductions capped at an agreed share of monthly pension such as 10% to 25%, or a lump-sum or instalment plan requested by the pensioner. Recovery after the cut-off period is barred unless fraud or misrepresentation is established or recovery is required by law or court order. For excess payments arising from government-attributed errors, banks must recover amounts based on government instructions and may presume those instructions comply with legal requirements, including court orders. If recovery is to be made from the pensioner’s account balance rather than from the monthly pension payment, the bank must hold express customer authorization on record. Where banks have doubts about government instructions, they must raise them with the relevant government rather than with the Reserve Bank of India.