There is no denying the fact that the Covid-19 pandemic brought a series of ‘Black Swan’ events to the entire population across India. A ‘Black Swan’ is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterized by their extreme rarity, their severe impact, and the widespread insistence they were obvious in hindsight.
Even as it was an unprecedented extreme global health emergency which consumed millions of human lives, at the same time it brutally smashed the economic landscape across the geographies through a series of economic lockdowns. Obviously, India too faced the wrath of the virus and caused extensive damage to the economy of the country.
Millions lost jobs or faced drastic cuts in their incomes and the most affected segment of the working population belonged to private sector organizations. This segment of employees faced hard times on the financial front and toiled (and continue to toil) hard to get back to the pre-covid level of earnings.
However, one thing is clear that the outbreak of Covid-19 pandemic exposed the negative aspects of working in private sector organizations, especially in the small ones. Here in small sized private organizations, it requires long work hours and operates on a hire-and-fire policy, job-and-wage cuts and ever-growing low-paying gig work.
Amid the pandemic-induced financial crisis, the Indian banking industry played a pivotal role in keeping the country’s economy afloat by funding the government’s stimulus packages and also granting various concessions to their customers across various sectors. This support helped millions of households to stay financially afloat. However, the employees of small sized private entities faced a lot of hassles to seek support/ relief from the banking system. As banks extended various relief measures to the government employees and those working in large corporates in the private sector, the workers in small entities mostly remained out of the preview of such concessional measures of the banks.
It’s not only in the loan segment, where the employees of the small-sized entities in the private sector are denied easy access to funds, even the concessions in deposit schemes are hardly granted to them, which otherwise are available to salaried employees in government and large corporate sector. It is a common practice with banks to charge high rates of interest on personal loans to employees working in the private sector as compared to the rate charged to the salaried class in government sector and listed private companies.
It’s pertinent to mention that the employees/workers in small sized private companies fall in the informal sector and this is what keeps them at a bay when it comes to availing financial services through a formal system. According to various reports/surveys, ‘over 80% of the Indian workforce operates under informal employment conditions, which is a barrier to India’s economic potential.’ Experts pick this huge volume of informal employment as an impediment to see the country reaching its full economic potential.
Now the impact of the pandemic is gradually fading away and the economy has almost got back to normal, it’s the time for getting the employees/workers in the informal sector into the formal financial system.
According to various reports, the Indian workforce under the informal employment landscape produces almost half of the gross domestic product (GDP). Bringing this amount of manpower into the formal sector through financial inclusion can prove a major push to the country to become third largest economy at a much faster rate. Though the workforce formalization initiative includes bridging the skill gaps, removing wage disparities, guaranteeing social security etc., their financial inclusion can go a long way to keep them confident on the financial front.
When it comes to their financial inclusion, it means tailoring financial schemes, both in deposit and loan segments, for them without any discrimination.
In line with the nature of this column, let’s look at the financial facilities available to the employees of private entities. Almost every bank has tailored loan as well as deposit schemes for this segment of salaried employees. For instance, J&K Bank has customized a deposit scheme (Saving Bank Accounts) for corporates and employees under its Corporate Salary Package (CSP)
What is the exact nature of the Scheme?
The scheme launched by the bank for employees working in private entities/companies has four variants: Platinum Salary Account, Diamond Salary Account, Gold Salary Account and Silver Salary Account.
Employees having gross salary upto to Rs.25000 are eligible for Silver Salary Account; employees having gross salary of Rs.25001 up to Rs. 50000 can have Gold Salary Account; employees having gross salary above Rs.50000 up to Rs.One lakh can open Diamond Salary Account; and those with salary above Rs. One lakh get Platinum Salary Account.
All these accounts are loaded with concessions and free service charges as per the category of the account. For instance, Diamond and Platinum Salary Account holders will get 25% & 50% discount on locker rent (small size) respectively. Among other concessions, the account holders will get 20 to 40 cheque leaves free of charges per year as per the category of account.
What is the eligibility criteria for availing the benefits of this Corporate Salary package?
The eligibility criteria for corporates includes:
Corporate will have to enter into an MOU that they shall open at least 50% accounts of their on-roll staff which are having a minimum of six months confirmed service. Notably, any corporate having beyond 30 employees has to open 50% accounts of their staff and the corporate having employees in the range of 15 to 30 have to open a minimum of 15 accounts of their employees.
Corporates with employees’ strength less than 15 are not eligible. And those falling under the NPA category are also not eligible.
A corporate should have at least one year of banking relationship with the bank. However, there is no bar for the companies/Corporates having ratings of BBB and above.
Eligibility criteria for employees includes:
-They should have salary credits for the last six months (Salary Slip & Letter of confirmation from the employer).
-Such existing savings/salary accounts of employees working in the corporates which are already having accounts with the bank shall not be allowed to transfer from the existing scheme to this package if the said employee is having loans with NPA status.
What about loan facilities for such employees?
J&K Bank has already a personal consumption loan scheme in place for this category of employees. Permanent employees of reputed institutions banking with can obtain cash loans under the scheme. It is pertinent to mention that only those regular/ permanent employees shall be eligible who are maintaining their salary accounts with J&K Bank and/or will shift existing salary accounts to the Bank with at least one salary received in that account.
The quantum of finance is linked to the income of employees. It’s 30 months gross salary or Rs 25.00 lacs, whichever is lower. And the loan is repayable in 120 installments with certain conditions.