DA Hike: The Indian Bank’s Association (IBA) recently announced an increase in dearness allowance (DA) for bank employees. The rate for May, June, and July of 2024 is set at 15.97%. This article explains the methodology used to calculate DA and offers support for the most recent modification.
Understanding DA Calculation for Bank Employees
The DA for bank employees is calculated based on the All India Consumer Price Index for Industrial Workers (CPI-IW) with the base year 2016=100. Here’s a step-by-step explanation of how the latest DA rate of 15.97% was determined:
Key CPI Figures
- January 2024: 138.9
- February 2024: 139.2
- March 2024: 138.9
The average CPI for these three months is 139.
How DA is Calculated
- The average CPI-IW for the last quarter (Jan-Mar 2024) is considered.
- In this case, the average is 139.
- A base point of 123.03 is subtracted from the average CPI-IW (139 – 123.03 = 15.97).
- This difference (15.97) translates to the DA percentage (15.97%).
New Pay Scales
In March 2024, the pay scales for employees of banks in the public sector were amended with a 17% salary hike that took effect from November 1, 2022. The revised pay scales encompass all scales from Scale I to Scale VII, with a range of Rs. 48,480 to Rs. 173,860.
DA Index Adjustment
The dearness allowance is now payable at 1.00% of ‘pay’ per percentage point of the index, ensuring a more substantial allowance with every variation over the base index of 123.03 points.
Impact on Pensions
Dearness relief on pensions for bank employees is calculated similarly, using the quarterly average CPI-IW figures. The adjustments will be made bi-annually, reflecting the changes over the base index.
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