OBC creamy layer explained: why a parent's PSU salary alone cannot shut a candidate out

What is the creamy layer?

It is the better-off part of the Other Backward Classes, kept out of the OBC quota. The Supreme Court introduced the idea in the Indra Sawhney case in 1992, when it upheld 27% reservation for OBCs in central government jobs but said the benefit must not go to families that had already moved ahead.

The government turned that into rules through an Office Memorandum of September 8, 1993. It works in two ways. Children of officers directly recruited to Group A or Group B posts in government are excluded on the basis of their parents’ rank. For everyone else there is an income and wealth test, with a limit that has risen over the years and now stands at ₹8 lakh a year.

How was it meant to work for PSU and private-sector families?

By the rank of the parent’s post, once it was matched with a government post. The 1993 order said the same status rules would apply to employees of public sector undertakings, banks, insurers and universities in posts “equivalent or comparable” to Group A or Group B.

That matching was never fully done. Until it was, the order said the income test would apply. But the same order contained a clear exception: income from salaries and agricultural land was not to be added up in working out a family’s gross annual income.

What did the government do instead?

It began counting the salary. A Department of Personnel and Training letter of October 14, 2004, said that where equivalence had not been worked out, a parent’s salary and other income would be assessed separately. If either crossed the limit, then ₹2.5 lakh, for three years in a row, the candidate was treated as creamy layer.

In practice this meant the child of a PSU engineer could be excluded on pay alone, while the child of a government employee was still judged by the rank of the parent’s post. A parliamentary committee later remarked that the letter did more to confuse the position than to clarify it.

Who went to court, and what was decided in March?

Civil services candidates who were denied OBC benefits because of their parents’ pay. They included Rohith Nathan, an OBC candidate of the 2012 exam whose father worked for a private IT company, G Babu, whose father was an engineer at Neyveli Lignite Corporation, and candidates of the 2015, 2016 and 2017 exams whose parents worked in PSUs or banks.

They won before the Central Administrative Tribunal and the Madras, Delhi and Kerala High Courts. On March 11, 2026, a bench of Justices P S Narasimha and R Mahadevan dismissed the Centre’s appeals. Writing for the bench, Justice Mahadevan held that “a mere government letter cannot have the effect of overriding, overruling or superseding” the 1993 order, and that deciding creamy layer status by income alone, without looking at the parent’s post, was “clearly unsustainable in law”.

Treating children of PSU or private employees differently from those of government employees, the court said, would breach the equality guarantees in Articles 14, 15 and 16. The aim of the exclusion “is not to create artificial distinctions between equally placed members of the same social class”. It gave the government six months to reassess the candidates and to create supernumerary posts for them where needed.

Why did the Centre go back to court?

Because the ruling arrived five days after the 2025 civil services results. The Union Public Service Commission declared the final results on March 6, recommending 958 candidates, and their services had yet to be allocated.

In its application the Centre said it was not seeking a review. It asked that the ruling apply only to the future, warning that more than 5.69 lakh reserved vacancies, including 3.70 lakh OBC posts, had been filled between 2016 and 2025 under the old reading, and that 18 states and Union Territories follow the 1993 order. It also asked for two years to work out equivalence between posts in PSUs, banks and private bodies and government posts. The court refused to stay its judgment on September 1 and reserved its order on September 24.

What did the court say on November 6?

It refused to modify its ruling. The bench said its reading of the 1993 order and the 2004 letter was not open to reconsideration and binds all authorities under Article 141. It directed that “the creamy layer principle, as interpreted in the said judgment, shall govern the allocation of services” for OBC candidates of the 2025 exam.

It also drew a line. Selections, appointments and allocations already completed will not be reopened, and the seniority of other employees will not be disturbed. Similar cases still pending can be decided on their merits. On the request for two years, the court said building a uniform system was for the executive and the legislature, and gave two more months to comply.

What happens now?

The government must finish allocating services to the 2025 batch under the new reading. OBC candidates whose parents hold PSU, bank or private-sector jobs will be judged by the status of those posts, not their pay packets.

The larger task, matching thousands of posts outside government with Group A and Group B posts, is still undone. Until it is, as of November 2026, the court’s March judgment is the rule that departments and tribunals must apply.