'A major risk looming large': RBI warns against Old Pension Scheme

"A major risk looming large on the subnational fiscal horizon is the likely reversion to the old pension scheme by some states," the central bank said.

"The annual saving in fiscal resources that this move entails is short-lived. By postponing the current expenses to the future, states risk the accumulation of unfunded pension liabilities in the coming years," it said in its report on state finances released Monday.

Himachal Pradesh is the latest state to announce the restoration of the old pension scheme after Congress won the assembly elections.

It is the third Congress-ruled state after Rajasthan and Chhattisgarh to do so.

Jharkhand, where Congress is an ally of the ruling coalition, has also returned to the old system.

Arvind Kejriwal’s Aam Aadmi Party-ruled Punjab is considering it as well.

Economists have warned that the financial liability owing to the Old Pension Scheme would take a dangerous shape as states don’t create a corpus to fund it.

The old scheme was replaced by the National Pension Scheme (NPS) for central and state government employees with defined contributions.

Congress has justified its move on grounds of social security and the welfare of the employees of the states where it is in power.