— By The Hindu Business Line | December 29, 2016, 10:49 am
New Delhi, December 29:
In a significant move, the Centre and the Reserve Bank of India now have a solution for a pain point that factories and export houses are facing post-demonetisation. These entities can now digitally disburse money to unbanked contract workers via pre-paid cards.
The Reserve Bank has expanded the scope for issuing pre-paid cards beyond listed companies, bringing relief to millions of small and medium businesses in tiding over their payment-related hurdles.
Banks can now issue pre-paid instruments to even unlisted companies, sole proprietorships, partnership firms, municipal corporations, and urban local bodies for onward issuance to their staff/employees/contract workers.
"This RBI move opens up the open-loop pre-paid cards market to cover every SME, shop or factory. It also opens up the pre-paid market for players like us, as we will be able to issue such cards to more entities, including SMEs," Sunil Kulkarni, Deputy Managing Director, Oxigen Services, a payment solutions provider, told BusinessLine.
Prior to this, only stock exchange-listed corporates could be provided with pre-paid cards to be issued onwards to their staff/employees, he pointed out.
Kulkarni also said that the government would be the biggest beneficiary of this move, as "nobody will have an excuse that he has to pay cash for fulfilling his payment obligations".
Rajib Saha, President & CEO, Indepay Networks, said this move will help boost digital transactions. "The pre-paid card is the solution to interoperability issues faced by e-wallets and can help early adoption of cashless methods of payments in the country," Saha added.
The MSME sector has been hit by a severe cash crunch after the government's abrupt move to remove high-value notes from circulation. In one fell swoop, as much as 86 per cent of the money in circulation in value terms was removed from the system.
The situation got more difficult for factories and export houses after the Labour Commissioner last month directed that every employee/contract worker should be disbursed wages only through electronic digital means.