1. In strategic push Narendra Modi government using note ban to boost financial inclusion

In strategic push Narendra Modi government using note ban to boost financial inclusion

The Centre is using demonetisation as an opportunity to push its financial inclusion initiative. In two separate communications on November 25, top central government officials asked states, banks and employers to open bank accounts for even temporary workers belonging to unorganised sector.

By: | New Delhi | Updated: November 28, 2016 6:47 PM
The government has asked all principal employers and contractors to ensure payment of wages to employees, including contract workers, only through bank accounts The government has asked all principal employers and contractors to ensure payment of wages to employees, including contract workers, only through bank accounts

The Centre is using demonetisation as an opportunity to push its financial inclusion initiative. In two separate communications on November 25, top central government officials asked states, banks and employers to open bank accounts for even temporary workers belonging to unorganised sector. Employers were “advised” to pay wages or salary to even contract and casual workers “only through bank accounts”.

In a joint letter to chief secretaries of various states, labour secretary M Sathiyavathy and financial services secretary Anjuly Chib Duggal said: “In order to facilitate financial inclusion of workers and to ensure timely payment of their wages, it has been decided to launch a campaign to open bank accounts in respect of those workers of organised and unorganised sectors who do not have their own bank accounts even now.”

In a separate letter to all deputy chief labour commissioners, chief labour commissioner AK Nayak said: “…all principal employers and contractors should be advised to ensure payment of wages to all employees, including contract workers, only through bank accounts.”

“For financial inclusion of workers, it has become necessary to ensure payment of wages to workers through bank accounts. Accordingly, you are advised to take up with all major employers to get bank accounts opened in respect of each worker/employee, if not already opened, especially in respect of contract and casual workers. This may be accorded top priority as payment has to be made for the current month by the end of this month or by the first week of the following month,” the letter said.

Nayak has asked for a report by as early as December 2, giving the number of bank accounts opened because of these efforts. The move is important, as some industry executives and economists have suggested that most of the daily labourers or even contract workers have been hit particularly hard, as most of them are paid in cash.

According to Pronab Sen, former chairman of the National Statistical Commission, the country’s informal sector – which makes up for around 45% of the country’s gross domestic product and almost 80% of jobs – will be hit harder than the organised one due to demonetisation.

Any move to ensure payment of salary through bank accounts will bring more transparency in the system, as both employers and employees could be tracked for any tax evasion.

Engineering Export Promotion Council vice-chairman Ravi Sehgal last week said even though some labourers had bank accounts, they were unwilling to accept direct payment through the banking channel for fears that if the amount exceeded Rs 50,000 (a year), they could lose their BPL status and consequently be stripped of various subsidy claims.

Also, as the aftermath of demonetisation reveals, Jan Dhan accounts – touted to be the government’s most important tool for financial inclusion and direct benefit transfer – seem to have been used by some as a parking lot for black money. While Jan Dhan accounts accumulated Rs 45,637 crore in over two years through November 8 when the government moved to make high-value currency notes invalid, such accounts witnessed deposits of a massive Rs 27,200 crore in just two weeks since demonetisation.

FE last week reported that roughly a fifth of around 32 million people employed in the textile and garment sector who are paid wages either daily or weekly have been hit. A majority of garment industry workers, especially in hubs such as Tirupur, do not have savings bank accounts there as roughly two-thirds of them are migrant workers. Similarly, 20-25% of roughly 2.5 lakh workers in the leather industry have been adversely affected as they are daily wage workers. The industry has been hit particularly hard as 90% of the units are small and medium enterprises.

However, in an interview to FE last week, commerce and industry minister Nirmala Sitharaman said the payment issue won’t protract beyond 10-15 days and all efforts are on to ease difficulties being faced by both the common man and workers.

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