How to derive multiplying factor- Pension revision in RBI

As stated in earlier post Pension in RBI has been revised effective March 19 and Bank has been asked by the M/o Finance to apply the multiplying factors in respect of various  categories of retirees as per table below.

The factor concept is new to RBI. However, it has been used by Pay Commissions. 6th Pay Commission suggested 1.86 for revision of pay and consequent pension etc. whereas 7th Pay Commission gave 2.57 as the factor.

In our case,  to know the derivation of these factors let us keep  in mind;

1.  As on 01.11.2012 CPI was 4440
2. Previously DA/DR was merged at 2836 on 1.11.07
3. So 4440-2836=1604 points or 1604/4 = 401 slabs were merged.
4. From 1-11-2007-the rate at which DA/DR that  was being paid per slab was 0.15%
   As such the percentage of DA/DR merger came to 60.15%  (@0.15% per slab *401 slabs) = 60.15% of basic pay.

That’s all. We only need to know merger percentage to calculate the factor for retirees from 1.11.2007 to 1.11.2012 as under:

Basic Pension=1
DA/DR merged   =60.15% =0.6015
BP after merger =1+0.6015=1.6015
Notional 10% of 1.6015=0.16015
Revised Basic Pension= 1.6015+0.16015=1.7616
So 1.76 is taken as one of the factor.

Similar process has been followed to arrive at the factors 1.50 (for pre 2002 retirees), and 1.38  (for those who retired form 1.11.2002 to 1.11.2007).

The factors  3.63 and 2.44 have been used to bring the basic pension of all the retirees at par with those who retired between 1.11.2007 to 1.11.2012 with a factor of 1.76. for example 2.06*1.76 is  taken as 3.63 and 1.38*1.76 is taken as 2.44.

To bring the BP of pre 2002 retirees at par with those who retired from 1.11.2002 to 31.10.2007 factor 2.06 has been used which is equal to 1.50*1.38.

This post is for those members who wanted to know the method of arriving at the factors used for revision of pension in RBI. Rest need not beat their heads about this. It is always better to  enjoy whatever one gets in old age.

Thanks