New DA Calculation introduced

Before the 12th Bipartite settlement was implemented, the Dearness Allowance (DA) for Bank employees was calculated based on the quarterly average of the All-India Consumer Price Index Numbers (AICPIN) for Industrial Workers Base 2016=100. The quarterly average from the base year 2016=100 was converted to base year to 1960=100 using linking factors (2.88*4.63*4.93). To find the rise in points, resulting average was compared to the previous quarter’s average. The slabs payable for the quarter were then calculated by dividing these points by 4. Slabs thus arrived at were multiplied by the applicable per slab rate to get the percentage of DA to be paid for the quarter.
After the above settlement, the slab method is no longer applicable.

Now the New DA Calculations shall be as per para 13 of the Bipartite settlement which reads:
“The Dearness Allowance shall be payable as 1.00 % of ‘pay’ per percentage point of Index. The DA in the above manner shall be paid for every variation of rise or fall over 123.03 points in the quarterly average of the All-India Consumer Price Index for Industrial Workers Base 2016=100. 0.01% change in DA on ‘pay’ for change in every second decimal place of CPI 2016 over 123.03 points.”

In short, the DA rate will now reflect a 1% increase for every rise in the quarterly average of the last three months based on the data provided by the Labour Bureau on the CPI with the base year 2016=100 over 123.03 points.

Following are the calculations in detail. The data used is for illustrative purposes only.

Consumer Price Index (CPI) -2016=100

New Methodology
DA rate at 1% for points above 123.03 of average index CPI 2016=100

The Old vs. The New
What Does This Mean for Bank Employees?
This change simplifies the DA calculation process by eliminating the need for conversion factors and directly using the CPI index as per the 2016 base year. It ensures that the DA reflects the current economic conditions more accurately, leading to a more transparent and fair compensation structure for bank employees.
As the banking community adapts to this change, all concerned may have a view of how their DA is calculated and how it will affect their overall earnings.
For a details – refer to documents provided by the IBA.

Impact on Bank Pensioners:
The New Methodology introduced vide para 13 of the settlement is applicable to only those whose pay scales stand merged at 8088 points (effective November 1,2022).
All Other Pensioners’ Dearness Relief is being paid according to the per slab applicable rate.
Switch over to New Methodology may take place after the pension is updated.
There are reliable reports that are indicating towards 100% neutralization of Dearness Relief and also of updating the Pension shortly.

Impact on RBI Pensioners:
In the Reserve Bank of India, the process of revising pay scales has been initiated by the Bank in consultation with the Associations, and preliminary negotiations have since been resumed. Given that the pay scales have been finalized in the bipartite settlement in the Banking Industry, a similar outcome (merger at 8088 points) in the RBI and consequent revised pay scales may soon follow. There is a strong likelihood for the introduction of the DA pattern in the RBI, as in the Bipartite settlement.
Subsequently, the exercise of ‘Pension updation’ may begin and it is likely to be finalized expeditiously in the circumstances.