Most small businesses and cautious individuals in India have started transferring money to private sector and foreign banks in the wake of a strike call given by public sector bank unions for next week. Private banks have already sent letters to corporate customers having payroll accounts with them, to transfer money to these accounts to avoid a cash crunch during the last week of the financial year.
Customers would face major problems as the next clearing operation after March 23 would, in all likelihood, only be on April 2. If talks do not fructify, bank trade unions have threatened an indefinite strike from May 3.
Bank unions have called for a strike next week for three days (March 28, 29 and 30). However, the preceding and succeeding days — March 27 and 31 — are bank holidays due to festivals. Also many of the union employees are also planning to take a causal leave on March 26. Employees of old private sector banks would also participate in the strike.
With the strike coming at the end of the financial year, all organisations, big and small, would have a tough time, making payments before the year end to complete financial transactions.
Three leading private banks — ICICI Bank, HDFC Bank and UTI Bank — are the biggest players in the payroll accounts, together having around 1.25 crore payroll accounts.
The salaried class, along with the dealer-supplier chain, will be among the worst-hit. Many corporates make payments to suppliers at the end of the month while many suppliers are located in the interiors of the country. Since private banks do not have a massive branch network in these areas, they maintain accounts with PSU banks.
These accounts would also include payroll accounts of state and central government entities. In most cases, the main accounts of the public sector units are with PSBs. Banks have already asked these entities to transfer money to the payroll accounts so as to avoid last-minute hiccups. Corporates are likely to start taking action of transferring money and making statutory payments other than all other payments. This would help the corporates also make cash payments.