The government has announced a slight revision in Dearness Allowance (DA) for bank employees for the months of May, June and July 2026, which will increase salaries for workmen and officer employees.
Across employee levels, for basic salaries between ₹48,000 and ₹1,17,000, the DA increase ranges from ₹435 to ₹1,050.
Notably, this comes a week after the Finance Ministry announced a DA revision for central government employees and pensioners (including railways and defence personnel), from 58% to 60% of Basic Pay, with effect from 1 January 2026.
What is the DA increase announced?
In a notice released by the Indian Banks' Association (IBA) dated 2 May, the body said that for employees under XII BPS/9th Note, the increase is as per the All-India Average Consumer Price Index for Industrial Workers (AIACPI-IW) for the quarter ended March 2026.
DA is, by practice, revised twice a year by the All-India Consumer Price Index (AICPI) to counter inflation fluctuations. The allowance is a percentage of employees' basic salary, specifically intended to help cover the increased cost of living.
According to the IBA notice, the average CPI for the three months is 148.73, which works out to a 25.70 differential over the 123.03 baseline (CPI 2016), which brings the increase for May, June and July 2026 to 0.70 points (148.73 - 123.03 = 25.70).
Further, in another notice, the body said that for employees yet to be enforced XII BPS / 9th Note and are still under XI BPS / 8th Note, the following increase is as confirmed by the All-India Average Consumer Price Index for Industrial Workers (AIACPI-IW) for the quarter ended March 2026.
Here, the average CPI for the above is 9777.52, yielding a differential of 856. It added that, as per the terms of the settlement dated 11 November 2020, the DA rate payable to workmen and officer employees for the months of May, June and July 2026 will be 59.92% of basic pay.
DA: Is it part of your CTC? Is it taxable?
DA is part of an employee's cost-to-company (CTC) and is credited to the monthly salary of central government employees. As per the ministry, payments on account of DA involving fractions of 50 paise or more may be rounded off to the next higher rupee, and fractions of less than 50 paise may be ignored.
For salaried employees, DA is subject to income tax in its entirety. Income-Tax Rules mandate that the DA component is stated separately in a taxpayer's I-T returns (ITR).
DA for bank employees: What's ahead?
Notably, the IBA and the Centre have been engaged in negotiations on the salaries and benefits of employees at state-owned banks since March this year. As per the bank unions pact, the demand is for the monthly salary of the PSU bank employees to rise by 17% with effect from 1 November 2023, and DA is expected to correspond to 8088 points. The pact also seeks to confirm five-day workweeks for public banks, i.e., all Saturdays will be holidays.
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