Demonetisation: Pay day makes bosses generous, banks nervous

Employees in many private firms have seen miraculous transformations in their bosses. Trying every possible trick in the book to dispose of the discontinued ₹500 and ₹1,000 denomination notes, some private firms and even business owners are reported to have been paying monthly salaries to their employees in cash.

 

Paying salaries has unfortunately become a way for people with ill gotten and undeclared wealth to dispose off their stash. The people suffering are employees because they are being given invalid currency as pay.

 

Small businessmen, entrepreneurs and even salaried people are using cash to pay advance wages to employees and vendors. There is no limit to how much cash can be given out like this. So, businessmen are even asking their employees to deposit some of their cash into their accounts so as to escape IT detection and loss by the sudden devaluing of the currency. Employees are being asked by generous bosses to accept devalued cash as they have no other means of paying them.

 

In Gujarat, however, employees and employers have no problem with this arrangement. An article in the Indian Express highlighted how several firms and establishments in the Gujarat Industrial Development Corporation (GIDC) estate of the city have paid advance salaries to their employees in cash to get rid of now-defunct Rs 500 and Rs 1000 notes. Some companies have paid advance salaries up to six months in cash.

 

A business owner doing this has been quoted as saying, “I paid my employees their salaries in advance to ensure that I put the demonetised notes to use in the most transparent manner. What is wrong in paying off salaries to my employees, which are being audited and will reflect in my yearly accounts. I have not done anything wrong by doing that.”

 

Some of you may find your company’s salary reimbursement system changed to adjust to the demonetisation. So instead of cash, you may have to go the electronic way. But for more professional business houses and established business, it will not be a matter of concern

 

According to bank officials, more than half of all transactions in a month usually take place in the last three days and the first week of the next month. Reason being – salaries need to be credited and withdrawn.

 

While we have reported on whether India is ready for payday, in this article we will look into how banks are going to handle the surge in withdrawals as the month-end comes.

 

According to a report in TOI, some companies have applied to SBI for prepaid cards for their employees who are paid in cash. The prepaid cards work as an alternative to cash. For people without a bank account, prepaid cards provide the convenience and security of a card product without requiring an existing banking relationship or credit history. Cardholders can use prepaid cards to pay various merchants payments and e-Commerce transaction. Smart Payout cards/eZ-Pay cards can also be used for withdrawing cash at ATMs.

 

SBI has already been using its mobile ATMs to help distribute cash in various cities. They are giving cash up to ₹1,000 to those having debit cards from these ATMs.

 

Many private banks are distributing cash to corporate employees. ICICI Bank has been conducting  on-site camps across cities like Bengaluru, Chennai, Hyderabad, Pune, Kolkata and Chandigarh. Customers are allowed to exchange cash for old notes, withdraw cash via cheques and through micro-ATMs. HDFC Bank said it is also planning to open special counters at branches for its customers, ahead of payday.