Demonetisation: Govt mulls separate banking window for labour-intensive units

A representative of the Federation of Small and Medium Industries said that small and medium units typically need to make worker payments almost every alternate day, which makes cash the preferred mode.

Written by Anil Sasi | New Delhi | Published:November 14, 2016 1:16 am

As bank branches across the country struggle to meet the surging demand for cash, the government is looking at options that include opening a separate banking window for labour-intensive industrial units in sectors such as textiles and construction to enable them easier access to cash to make worker payments.

This, according to an official aware of the options being considered to ease the supply constraints, could be in the form of special labour payment accounts that could be exempted from the withdrawal restrictions to effectively ensure that the employment-intensive units could temporarily tide over the currency crunch for making daily or weekly payments to their workforce.

Watch What Else is Making news

Officials said that this was being considered keeping in view the massive rush at banks and follows petitions from lobby groups representing small and medium unit owners that they were unable to pay worker wages. Also, there are reports of production losses across a number of labour-intensive sectors as part of the workforce has been forced to queue up in front of bank branches despite the possibility of a loss of the day’s pay. The measure is among steps being considered at the highest levels in the government to temporarily ease the strain on the banks, if the pressure on the banking sector continues even in the coming days. The problems faced by banks in coping with the rush is despite the claims by the apex banking sector body — the Indian Banks’ Association — that in the last three working days, nearly Rs 30,000 crore cash has been disbursed in currency notes of lower denominations and the newly introduced Rs 2,000 notes.

The MSME sector units generally have a mix of daily wage workers and weekly wage workers, alongside permanent staff who get monthly salaries. Across the country, in labour intensive sectors such as construction, textiles and garments and other MSME units, daily wagers and weekly wage workers are currently either being paid just a portion of their salaries or they are receiving no pay as the unit owners grapple with the ongoing cash crunch. In the garment hub of Tirupur, for instance, nearly 70 per cent of units offer weekly wages to sections of their workers, a senior executive with the Confederation of Indian Textile Industry, a sectoral lobby group, said. “The feasibility of this (scheme) is being discussed, alongside other options to ease the strain on the banking sector if the situation does not improve in the coming days,” an official said.

A representative of the Federation of Small and Medium Industries said that small and medium units typically need to make worker payments almost every alternate day, which makes cash the preferred mode.

As per 4th All India Census of MSME conducted by the Ministry of MSME, the number of functional and non-functional registered MSMEs in the country are 15.64 lakh and 4.96 lakh respectively. The share of MSME products in the exports from the country, which was 42.42 per cent in 2013-14, had gone up to 49.86 per cent in 2015-16.