DA Calculation Formula : How DA for bankers is calculated ?

Dear Readers, Here in this article we will discuss DA calculation formula used for calculating Dearness Allowance (DA) for bankers. As you know “Consumer Price Index” is used for arriving at final DA payable. Dearness Allowance is reviseCPId every quarter for bank employees based on average CPI of that quarter.

Consumer Price Index (CPI) is released by Ministry of Labour, Govt of India on monthly basis based on year 2001.

What is Dearness Allowance ?

Dearness Allowance is cost of living allowance paid to central government employees , PSU employees , pensioners to protect the erosion in the real value of basic salary on account of inflation.

[Also Read : Expected DA increase for bankers from Nov 2017 to Jan 2018]

This allowance is calculated on the basis of increase or decrease in ALL INDIA CONSUMER PRICE INDEX for Industrial workers (CPI-IW). The Consumer price index is the estimation of price change in a representative basket of goods and services during a period which is pegged into index numbers.

Dearness Allowance – DA Calculation Formula :

Ministry of Labour and Employment , Government of India releases Consumer Price Index at base year 2001=100 for industrial workers (CPI-IW).

Collect month wise CPI data for last quarter (April May June).

CPI is converted using conversion factor 4.63 and 4.93 ; linking the conversion factor base year 2001=100 to base 1960=100.

Let us suppose – CPI for April, May, June 2017 was 277,278 and 280 respectively.

Apply Conversion factor 

For April –            277*4.63*4.93 = 6322.77

For May –             278*4.63*4.93 = 6345.60

For June –            280*4.63*4.93 = 6391.25

Average CPI = [{6322.77+6345.60+6391.25}/3] = 6353.20

4440 DA slabs have been merged in 10^th BPS. Deduct 4440 slabs from average CPI = 1913.20

Divide 1913 by 4 to convert to quarterly DA slabs [1913/4] = 478 , So DA slab for next quarter will be 478 on which 0.10 percent is payable as DA.

So new DA payable for next quarter comes out to be = 47.80 percent

Deduct the previous quarter DA from new DA, increase in DA slab can be calculated = 47.80-45.60 =2.20 percent