History of DA (Dearness Allowance) for Bank Employees

History of DA or Dearness Allowance for Bank Employees

For those who just want to know about present  DA for the ensuing quarter please click the following link.

Da for the latest Quarter

If you really want to know about the history of DA for bank employees  please read on…

Majority of the  bankers don’t know the background of  Dearness Allowance  for bankers.

Young bankers are curious to know, why one slab  is granted for raise of every four points of CPI(IW). We just want to educate the bankers about the history of  Dearness Allowance.

DA as Temporary Allowance:

DA is an allowance meant for meeting the rise in cost of living, and is of temporary in nature.   It was introduced during the second world war time, when the cost of living has sky rocketed to the roof.  Common people living on fixed income have faced considerable hardships. Leave alone the blue collared employees even the white collared employees couldn’t make the ends meet.

Under these circumstances the hardships the various organizations’ (Companies, State Governments, and Central Government)  have made sincere efforts  for mitigating the hardships of all workmen employees.  The organizations main objective was to see that their workmen  day to day needs were  satisfied. Thus a new allowance which was temporary in nature was introduced, and it is our present day DA or dearness allowance. The name was the same even during the world war II days..

During the initial days majority of the employers were expecting that it would be of temporary nature and the prices will come down after  the end of the war and normalcy is restored.  But to their dismay all their expectations have just failed to materialize.

First Pay Commission and GADGIL Committee:

The first pay commission had a more optimistic view on the price control and has thought that the index has reached the peak in 1947 where in the average index was at 289 (Base year 1939 = 100) and has actually provided for a gradual decrease in DA.

Gadgil committee or popularly known as the Dearness allowance committee has anticipated that the index would not fall beyond the range of 265 to 284.  The  committee was of the opinion that there is no point in paying the temporary allowance,  when everybody knows that prices of essential commodities will never revert back.  The committee has indeed recommended that it is not worthy to pay  temporary allowance , and has recommended for treating the 50% of DA as basic pay.   This is a historic decision made by the committee.

This is the genesis for the demand by central government employees for merger of DA with basic. The Central government has implemented it for the fifth pay commission also.   But, for bankers merger with basic was never implemented. (Except during Bipartite Settlement)




Sastry Award  in its report dt.26/03/1953 has clearly defined what DA is,  the following are the extracts from the sastry award

142.”Dearness allowance   is intended to provide for an increase over the basic pay in order to meet a rise in the cost of living where it is expected that it will be only of a temporary character, and will not last long. Instead of having quick revisions of the wage scale to meet such contingencies, the practice has been to fix the basic wage at a level below which prices will not go down so far’ as can reasonably be foreseen. An increase over and above this point due to a rise in cost of living is provided for by the grant of dearness allowance ’’ .

The committee has identified two principal methods for calculating the DA for bankes


  1. The first method is to fix flat rate of DA or a definite percentage of basic pay as DA.
  2. Second method is to link the DA, with rise and fall of living index.


Both these methods were used by the employers and different industries.  All tribunals for bank employees prior to Sen tribunal  adopted the first method.   Sen Tribunal however has linked DA for bank employees to the price index.

As on date we all know that the second method is the best way to protect the salaries from inflation.  But it is astonishing to know that both the bank employees and the management have opposed the second method.  We all with the advent of latest communication equipment may laugh at it, but it is the lack of effective communication system that prompted the employees to go for first method.

To our benefit Sastri award has recommended the second method for fixing of DA for bank employees.   The rate at that time is 7.5% of basic pay for every raise of 10 points of living index. It will be paid twice a year basing on the average of past six months of index.

DESAI AWARD On Calculation of DA:  


Desai Award gave its final report during June 1962 nearly a decade after the Sastri award. The present day calculation of allowance is primarily based on the recommendations of Desai award.    The committee has felt that the  hike should be in commensurate with the inflation and the  increase should reflect the price rise with minimum time lag.

Further the committee has fixed that for every four points raise i.e one slab  3%  (3%for workmen and 4% for substaff) of basic pay should be paid as DA.  It should be worked out every quarter based on the all india index published in the Indian Labour Journal.   The base year is  1949  and the index is 1949=100.

Still we are following the same principle and the only change is the base index is 1960 = 100.

The following table will explain the journey of DA slabs to % hike in basic pay for all the ten bipartites

Bipartite Settlement % hike for each DA Slab
First Bipartite 3% for Clerks and 4% for Subordinate staff

Desai Award to continue

Second Bipartite 3% for Clerks and 4% for Subordinate staff

Base year changed to 1960=100

Third Bipartite 1.5% for Clerks and 2% for Subordinate staff
Fourth Bipartite 1.2% for Clerks and 1% for Subordinate staff
Fifth Bipartite 0.67% for Clerks and  Subordinate staff
Sixth Bipartite 0.35% for Clerks and  Subordinate staff
Seventh Bipartite 0.24% for Clerks and  Subordinate staff
Eighth Bipartite 0.18% for Clerks and  Subordinate staff
Ninth Bipartite 0.15% for Clerks and  Subordinate staff
Tenth Bipartite 0.10% for Clerks and  Subordinate staff


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