Frequently Asked Questions

Payment of Pension to Government Pensioners

(Updated as on April 14, 2020)

Scheme for Payment of Pension to Central Government Pensioners by Authorised Banks

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. RBI has issued certain instructions in this regard which is available in the Master Circular – Disbursement of Government Pension by Agency Banks dated September 9, 2019. Clarifications, in the form of questions and answers, on certain issues related to the instructions issued by RBI is given below.

1. Whether a Joint Account can be continued for family pension after death of a pensioner?

Yes, the banks should not insist on opening of a new account in case of Central Government pensioner if the spouse in whose favour an authorization for family pension exists in the Pension Payment Order (PPO) is the survivor. The family pension should be credited to the existing account without opening a new account by the family pensioner for this purpose.

2. When is the pension credited to the pensioner's account by the paying branch?

The pension paying banks credit the pension amount in the accounts of the pensioners based on the instructions given by the Pension Paying Authorities.

3. Can the pension paying bank recover the excess amount credited to the pensioner’s account?

Yes, details of the uniform procedure for recovery of excess/wrong payments made to pensioners drawing pensions under the Scheme for payment of pension to Central /Civil/Defence/Railways pensioners through agency banks, have been put in place by RBI in consultation with Government of India are given below:

(a) As soon as the excess/wrong payment made to a pensioner comes to the notice of the paying branch, the branch should adjust the same against the amount standing to the credit to the pensioner’s account to the extent possible including lump sum arrears payment.

(b) If the entire amount of overpayment cannot be adjusted from the account, the pensioner may be asked to pay forthwith the balance amount of overpayment.

(c) In case the pensioner expresses his inability to pay the amount, the same may be adjusted from the future pension payments to be made to the pensioners. For recovering the overpayment made to pensioner from his future pension payment in instalments 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.

(d) If the overpayment cannot be recovered from the pensioner due to his death or discontinuance of pension, then action has to be taken as per the letter of undertaking given by the pensioner under the scheme.

(e) The pensioner may also be advised about the details of over payment/wrong payment and mode of its recovery.

4. Should acknowledgement be given by pension paying banks while accepting Life Certificates from pensioners?

There have been complaints that life certificates submitted over the counter of pension paying branches are misplaced causing delay in payment of monthly pensions. In order to alleviate the hardships faced by pensioners, agency banks were instructed to mandatorily issue duly signed acknowledgements. They were also requested to consider entering the receipt of life certificates in their CBS and issue a system generated acknowledgement which would serve the twin purpose of acknowledgement as well as real time updation of records.

5. Who is responsible for deduction of Income Tax at source from pension payment?

The pension paying bank is responsible for deduction of Income Tax from pension amount in accordance with the rates prescribed by the Income Tax authorities from time to time.

6. Can a pensioner withdraw pension from his/ her account when he/she is not able to sign or put thumb/toe impression or unable to be present in the bank?

Yes, instructions have been issued by RBI to pension disbursing banks to allow withdrawal of pension by following certain procedures which are given below :

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

(i) In order to take care of problems/ difficulties faced by sick and disabled pensioners in withdrawal of pension / family pension from the banks, agency banks may categorise such pensioners as under:

(a) Pensioner who is too ill to sign a cheque / unable to be physically present in the bank.

(b) 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.

(ii) With a view to enabling such old/sick/incapacitated pensioners to operate their accounts, banks may follow the procedure as under:

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

(b) Where the pensioner cannot even put his/her thumb/ toe impression and also would not be 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 have been asked to display the instructions issued in this regard on their notice board at the branches so that sick and disabled pensioners can make full use of these facilities.

7. How the payment of Dearness Relief at revised rate is to be paid to the pensioners?

The pension paying agency banks have to revise the Dearness Relief based on the copies of government orders supplied by government to them through post, fax, e-mails or by accessing the information from the website of the concerned governments, and authorize their pension paying branches to make payments to the pensioners immediately.

8. Whether a pensioner is entitled for any compensation from the agency banks for delayed credit of pension/ arrears of pension?

Yes, 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. This compensation should 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.

These FAQs are issued by the Reserve Bank of India (The Reserve Bank) for information and general guidance purposes only which cannot be quoted in any legal proceeding and will have no legal purpose. It is not intended to be treated as legal advice or legal opinion. The Reserve Bank will not be held responsible for actions taken and/or decisions made on the basis of the same. For clarifications or interpretations, if any, readers are requested to be guided by the relevant circulars and notifications issued from time to time by the Reserve Bank and the Government.