For bank employees, managing work-life balance is crucial, and Privilege Leave (PL) plays a significant role in ensuring that. Unlike Casual Leave (CL), which is meant for short, unplanned absences, or Sick Leave (SL), which is strictly for medical reasons, PL is a type of earned leave that employees accumulate over time and can use for vacations, personal commitments, or even encashment at retirement.
PL is not just a benefit—it’s a right that employees earn with their service. Under the 12th Bipartite Settlement, banks have clear policies on how PL is accumulated, availed, rejected, or encashed. Additionally, recent court rulings have reaffirmed that leave encashment is an employee’s property, making it even more important for bank employees to understand their rights regarding PL.
This blog will serve as a complete guide to PL in banks, covering:
- How PL is accumulated and used.
- Can your boss reject your leave?
- PL encashment on resignation, VRS, or retirement.
- Recent court judgments protecting leave encashment rights.
- RBI guidelines on mandatory leave for bank employees.
Let’s get started!
1. PL Accumulation & Eligibility
Privilege Leave (PL) is not granted all at once; it is earned over time based on the number of days an employee has worked. The 12th Bipartite Settlement outlines clear rules on how PL is accumulated, who is eligible, and the maximum number of PL days an employee can hold.
How is PL Accumulated?
PL is credited based on actual working days, excluding certain types of leave. Here’s how it works:
- Employees earn 1 day of PL for every 11 days of active service.
- This means that in a full year (assuming no extended leaves), an employee can earn 30 days of PL.
- PL is credited annually at the beginning of the year.
Eligibility for PL
- An employee becomes eligible for PL after completing 11 months of service.
- Part-time bank employees working on scale wages are also eligible for PL on a pro-rata basis.
- Employees on probation may not be eligible to avail PL but will accumulate it.
Maximum PL Accumulation Limit
- Employees can accumulate up to 270 days of PL.
- However, at the time of retirement or resignation, PL encashment is capped at 255 days.
- Any additional leave beyond this limit will lapse if not utilized.
What If You Don’t Use Your PL?
- Unused PL can be carried forward to the next year (subject to the 270-day limit).
- In some cases, banks allow PL encashment during service, but this is limited (discussed in the encashment section).
By understanding how PL is earned and stored, employees can plan their leaves wisely and maximize their financial benefits at the time of exit.
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2. Availing PL: Rules & Conditions
Earning Privilege Leave (PL) is one thing, but taking it when you need it is another challenge. Bank employees must follow specific rules when applying for PL, including prior notice, limits on the number of times PL can be availed, and exceptions for medical grounds.
Notice Period Requirement
- Employees must give a minimum of 10 days’ notice before taking PL.
- The notice period was earlier 15 days, but it has been reduced under the 12th Bipartite Settlement to make leave planning easier.
- However, in urgent situations, some banks allow leave with a shorter notice period at the manager’s discretion.
How Often Can You Take PL?
- Employees can avail PL up to 4 times in a calendar year.
- However, one occasion out of these can be a single-day leave.
- If an employee needs PL more than 4 times a year, special approval from higher management is required.
PL on Medical Grounds
- If an employee is sick and requires PL for more than 4 days, it will not be counted under the 4-occasion limit.
- A medical certificate must be submitted to avail this exemption.
Intervening Holidays & PL
- If PL starts before and ends after a public holiday, the holiday is counted as part of the leave.
- However, if an employee takes only a single day of PL, holidays before or after are not included.
Can PL Be Clubbed with Other Leaves?
Yes! PL can be combined with:
- Casual Leave (CL)
- Sick Leave (SL)
- Maternity Leave
- Compensatory Offs
However, PL cannot be clubbed with Special Leave or Extraordinary Leave (Leave Without Pay) unless management permits it.
By knowing these rules, employees can plan their vacations better and avoid unnecessary leave rejections.
3. Can Your Boss Reject Your PL?
Earning and applying for Privilege Leave (PL) is one thing, but getting it approved is another! Many bank employees wonder—can my boss reject my PL? The answer is yes, but only under valid reasons as per the 12th Bipartite Settlement.
When Can a Manager Reject or Postpone Your PL?
Your manager can reject or defer your PL under these conditions:
✅ If there is a staff shortage at the branch.
✅ During audit periods or financial year closing.
✅ If too many employees have already applied for leave at the same time.
✅ If the employee is involved in critical work that cannot be delayed.
💡 Important Rule:
Under the 12th Bipartite Settlement, if a manager refuses or postpones your PL, they must officially record the reason. This ensures transparency and prevents unfair denials.
What Are Your Options If Your PL Is Rejected?
If your leave is rejected, here’s what you can do:
- Request Reconsideration: If your leave was rejected due to timing, you can negotiate alternative dates with your manager.
- Escalate to HR or Senior Management: If you believe your PL was unfairly rejected, you can file an appeal with HR or your senior officer.
- Convert PL to Casual Leave (CL): If you need leave for a short duration, you can apply for Casual Leave instead of PL, which is usually easier to get approved.
- Plan Leave in Advance: To reduce chances of rejection, apply for leave early in the year and avoid peak workload periods.
Can a Manager Force You to Cancel Your Approved PL?
In rare cases, management can revoke an already approved PL if:
- An urgent work situation arises.
- A regulatory inspection or audit is scheduled.
- A critical banking operation requires your presence.
In such cases, banks may compensate employees for financial losses (like non-refundable travel bookings) if the cancellation was due to an official requirement.
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4. PL Encashment Rules
While Privilege Leave (PL) is primarily meant for rest and personal time, bank employees also have the option to encash their PL, converting unused leave into money. This can be done during service, at retirement, or on resignation/VRS. Let’s break it down.
a) PL Encashment During Service
Employees can encash a limited number of PL days while still in service under the following conditions:
1. Annual PL Encashment
- Employees can encash 5 days of PL per year.
- If the employee is 55 years or older, they can encash 7 days per year.
- The leave balance must not fall below 30 days after encashment.
2. PL Encashment Under Leave Fare Concession (LFC)
- Employees availing LFC can encash up to 30 days of PL in a 4-year block.
- Encashment under LFC is in addition to the annual 5-day encashment.
💡 Tip: Many employees encash PL with LFC to maximize their benefits while traveling!
b) PL Encashment on VRS (Voluntary Retirement Scheme)
- Employees taking VRS can encash up to 255 days of PL.
- The amount is calculated based on Basic Pay + Dearness Allowance (DA) at the time of VRS.
c) PL Encashment on Resignation
- If an employee resigns, they are entitled to encash only 50% of their PL balance.
- The maximum encashment allowed is 120 days.
- Encashment is made along with the final settlement after resignation.
💡 Important: A recent Bombay High Court ruling reaffirmed that leave encashment is an employee’s right and cannot be denied arbitrarily.
d) PL Encashment on Retirement (Superannuation at 60 Years)
- On retirement, employees can encash up to 255 days of PL.
- The encashment amount is calculated based on the last drawn Basic Pay + DA.
💡 Key Advantage: Since DA keeps increasing over time, PL encashment at retirement gives maximum financial benefit!
e) Taxation on PL Encashment
- During service: PL encashment is fully taxable.
- At retirement/VRS: PL encashment is tax-exempt up to ₹25 lakh under Section 10(10AA) of the Income Tax Act.
- On resignation: It is fully taxable, just like salary.
Why Is PL Encashment Important?
- Acts as extra income without affecting regular salary.
- Helps employees get a big lump sum amount at retirement or VRS.
- Recent legal cases have strengthened employees’ rights to demand rightful PL encashment.
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5. Mandatory Leave as per RBI Guidelines
The Reserve Bank of India (RBI) has made it mandatory for certain bank employees, especially those handling sensitive positions (cash, treasury, loans, etc.), to take a continuous leave of at least 10 days in a year.
Why is Mandatory Leave Important?
- Prevents fraud and irregularities by ensuring no single employee has uninterrupted access to critical systems.
- Allows the bank to conduct internal checks and audits in the absence of the employee.
- Helps maintain a healthy work-life balance for employees.
Are Mandatory Leaves Provided as Special Leave or Deducted from PL?
One common question among bank employees is:
👉 For mandatory leaves, are special leaves provided, or are they deducted from the employee’s PL (Privilege Leave) balance?
What Does the 12th Bipartite Settlement Say?
The 12th Bipartite Settlement does not introduce a separate category of “Special Leave” for mandatory leave requirements. Instead, it is up to individual banks to adjust this leave based on their policies.
How Are Mandatory Leaves Adjusted?
Most Banks Deduct from PL
- In many banks, the required 10-day mandatory leave (as per RBI guidelines) is deducted from the Privilege Leave (PL) balance.
- If an employee does not have sufficient PL, other leave balances (such as CL or SL) may be adjusted.
2. Some Banks Allow Special Leave
- Some banks provide dedicated “Mandatory Leave” separate from PL, but this is not a universal practice.
- This depends on internal HR policies and agreements between management and unions.
3. Leave Without Pay (LWP) Only in Extreme Cases
- If an employee does not have enough PL, CL, or other leave balances, the bank may grant Leave Without Pay (LWP) for mandatory leave compliance.
- However, this is rare and usually avoided by adjusting available leaves.
Union Demands for Special Mandatory Leave
During wage negotiations, unions have demanded that banks should provide “Mandatory Leave” as a separate leave category, rather than forcing employees to use their earned PL. However, no such provision was finalized in the 12th Bipartite Settlement.
Can Banks Force Employees to Take PL?
Yes. If an employee is in a sensitive role, banks can mandate them to take leave to comply with RBI guidelines. However, employees should be notified in advance so they can plan their absence.
6. PL in Case of Death of an Employee
If a bank employee passes away while in service, the legal heirs or family members are entitled to receive full encashment of the employee’s remaining PL balance.
Key Provisions for PL Encashment in Case of Death:
- The family can claim encashment of up to 255 days of PL as part of the final settlement.
- The encashment is calculated based on the last drawn Basic Pay + DA.
- Tax-Free Benefit: Under the Income Tax Act, leave encashment paid due to an employee’s death is fully tax-exempt.
- This amount is paid along with gratuity, provident fund, pension, and other dues.
💡 Tip: Family members should contact the HR or accounts department of the bank to process the claim smoothly.
7. PL and the New Leave Bank Scheme
The 12th Bipartite Settlement introduces a Leave Bank Scheme for employees facing long-term critical illnesses or medical emergencies.
How Does the Leave Bank Work?
- Employees can voluntarily donate their Privilege Leave (PL) to the Leave Bank.
- The donated PL is pooled together and is available for employees in need.
- Employees facing serious medical conditions like cancer, paralysis, kidney failure, organ transplants, etc. can apply for special leave from this Leave Bank.
- This helps financially and medically stressed employees who have exhausted their own leave balance.
Why Is This Important?
- Employees facing long-term hospitalization often run out of Sick Leave (SL) and PL, forcing them to take unpaid leave.
- The Leave Bank Scheme ensures they continue to receive salary during their recovery period.
- It promotes employee solidarity, allowing colleagues to support each other during crises.
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8. Recent Court Rulings on PL Encashment
In recent years, courts in India have reaffirmed that leave encashment is an employee’s right and cannot be denied arbitrarily.
Key Judgments on PL Encashment:
✅ Supreme Court Ruling: PL encashment at retirement is an earned right and cannot be withheld by banks.
✅ Bombay High Court Judgment: If PL encashment is denied without valid reason, employees can legally challenge it.
✅ Madras High Court Case: Leave encashment must be paid within a reasonable time after resignation or retirement.
What This Means for Bank Employees
- If your PL encashment is delayed or denied, you have the right to escalate the issue with HR, your union, or even legally.
- Banks must ensure timely payment of PL encashment at resignation, VRS, or retirement.
9. Final Thoughts: How to Maximize PL Benefits?
Privilege Leave (PL) is not just about taking vacations—it’s also a financial asset. Here’s how bank employees can make the most of it:
✔️ Plan Your Leave Wisely: Don’t wait till the last moment to use your PL. Apply early to avoid rejections.
✔️ Utilize PL Encashment: Use the annual 5-day encashment option and LFC-linked encashment to maximize financial benefits.
✔️ Stay Informed on New Leave Policies: The Leave Bank Scheme and Mandatory Leave Rules under RBI are important—ensure you know your rights.
✔️ Fight for Your PL Encashment Rights: If encashment is wrongfully denied, escalate the issue through unions or legal channels.
Wrapping Up: Why PL is a Game-Changer for Bank Employees?
- PL ensures job security, financial benefits, and a work-life balance.
- Proper PL planning helps in stress-free vacations and maximizing encashment benefits.
- With RBI’s mandatory leave rules, banks must enforce a minimum leave period, ensuring employees take time off.
- The Leave Bank Scheme is a huge step forward in employee welfare, providing additional security in medical emergencies.
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