No longer current — withdrawn, no replacement on file yet
Source: Reserve Bank of India · RBI/2010-11/544 · issued 24 May 2011 · ~1 min read
Quick answerRBI allows Urban Co-operative Banks to spread the extra gratuity cost from the Payment of Gratuity Act amendment over five years, starting FY2010-11, easing the one-year P&L hit.
What changed
RBI permitted UCBs to defer the incremental gratuity expenditure from the enhanced limits under the Payment of Gratuity Act over five years, instead of charging it fully in FY2010-11. This deferral applies only to active employees, not to retired or separated staff. The deferred amount need not be deducted from Tier-I capital.
What it means for you
UCBs get breathing room to absorb the higher gratuity liability without a sudden dent to their profit and loss account. The five-year spread helps maintain capital ratios since the deferred expenditure is not subtracted from Tier-I capital. Banks must still disclose the deferred amount in annual financial statements.
Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.
What banks were required to do at the time
Calculate the incremental gratuity liability from the amended Payment of Gratuity Act.
Charge at least one-fifth of the total incremental amount to P&L each year for five years starting FY2010-11.
Ensure full provisioning for gratuity payable to retired or separated employees in the year of payment.
Disclose the deferred gratuity expenditure appropriately in annual financial statements.
Acknowledge receipt of this circular to your Regional Office.
Who it affects
Primary (Urban) Co-operative Banks, Chief Executive Officers of UCBs, Finance and accounts teams of UCBs
❓ Common questions
Regulatory timeline
Decoded by BankPulse2026-06-19 01:23 IST
repealed_by — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
Status change: withdrawn03 Aug 2026, 04:00 IST
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
Can we defer gratuity cost for employees who retired during FY2010-11?
No, the deferral is not permitted for amounts payable to retired or separated employees. Those must be fully charged to the P&L in the year of payment.
Does the deferred gratuity expenditure impact our Tier-I capital?
No, RBI has clarified that due to the exceptional nature of this event, the deferred expenditure will not be reduced from Tier-I capital of UCBs.
📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
Repealed byRBI/2025-26/100 — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
📜 Read the original circular — full text as issued by RBI
RBI/2010-11/544
UBD.BPD.(PCB) CIR No. 49/09.14.000/2010-11
May 24, 2011
The Chief Executive Officers
All Primary (Urban) Co-operative Banks
Madam / Dear Sir,
Enhancement in gratuity limits - Prudential Regulatory Treatment
Please refer to para 10 of Memorandum attached to our Circular UBD.No.I&L.38/J.1-92/93 dated February 9, 1993 advising UCBs that it is necessary to estimate the liabilities on account of Provident Fund, Pension, Gratuity etc. on actuarial basis and full provision should be made every year for the purpose, in the profit and loss account by the primary co-operative banks.
2. Consequent upon the enhancement in gratuity limits following the amendment to Payment of Gratuity Act 1972, UCBs and their Associations have expressed that it would be difficult to absorb the large amount involved in a single year.
3. The issue has been examined from a regulatory perspective and it has been decided that UCBs may take the following course of action in the matter:
The expenditure, as indicated in paragraph 2 above, may, if not fully charged to the Profit and Loss Account during the financial year 2010-11, be deferred over a period of five years beginning with the financial year ended March 31, 2011 subject to charging to the Profit and Loss Account a minimum of 1/5th of the total amount involved every year.
Such deferment of expenditure due to enhancement of gratuity, will not be permitted in respect of amounts payable to the retired / separated employees.
4. The expenditure so deferred, may be disclosed suitably in the Annual Financial Statements.
5. In view of the exceptional nature of the event, the deferred expenditure would not be reduced from Tier-I capital of UCBs.
6. Please acknowledge receipt of this circular to our Regional Office concerned.
Yours faithfully
(Uma Shankar)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2010-11/544 · issued 24 May 2011. The plain-English explanation above is BankPulse’s own independent summary.
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=6434&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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