Release of Bank Arrears may Boost Spending

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A huge payout by banks to their employees over the next few weeks is set to give a push to business at retailers and ecommerce companies.
A number of government-owned banks are set to release salary arrears - totalling thousands of crores - to employees and it is likely to translate into higher consumer spending.

In February, the Indian Banks' Association agreed for a 15% increase in wages for 10 lakh employees. This would increase banks' annual expenses by Rs 4,725 crore. Since the revised salary is effective from November 2012, employees will get arrears of 30 months. The outgo towards arrears is estimated at Rs 11,812 crore.

The lowest rank employee — sub-ordinate staff — will get close to Rs 40,000 in arrears, while a general manager will receive close to Rs 3 lakh. "Some banks, such as Punjab National Bank, Corporation Bank and Canara Bank, have already paid a part of the arrears, and some more banks will be paying arrears in the month of August and September," said CH Venkatachalam, general secretary of the All India Bank Employees Association.

Consumer spending is increasing also with cooling interest rates prompting people to buy more consumer durables through monthly payment options and ecommerce companies offering generous cashback and discounts.

According to a study by ANZ Morgan, consumer sentiment was the highest ever this year, with more people believing that there are better days ahead. "The number of respondents who said they expect their families to be 'better off ' financially in a year's time was 41%, compared to only 10% who expect to be 'worse off ' financially," ANZ Morgan said.