Friday , December 14 2018

Finance Ministry Agrees the Proposal to issue ESOPs to Bank Employees

Finance Ministry gives in-principle nod to BBB’s suggestion for giving ESOPs to Bank Employees


Finance Ministry approves the move which allows public sector banks to offer stock options to their employees from next fiscal. This step will help retaining the experienced employees.

Banks which have earned profits and has shown phenomenal improvements in NPAs, will be issuing Employee Stock Option plans (ESOPs) to their dedicated employees. This would motivate employees to strive together to strengthen the financial status of the banks.

Sources revealed,  although,  the Finance Ministry has given in-principle nod, the meticulous details on the work out plan and the percentage of profit  that can be kept for ESOPs. This is based on the suggestion of Banks Board Bureau (BBB).

The proposal also includes, the certain percentage of banks’ net shares will be given to employees. The ESOPs for the main banks would be 5 per cent of profit after tax and for the smaller banks, it would be about 3 per cent. In addition to this there would extra bonuses and other performance-linked packages as suggested by Banks Board Bureau (BBB).

In private sector, companies offer stocks to reward and retain key and top-performing employees and it is common.

In the month of January, BBB chief Vinod Rai recommended for an improvement in the compensation package across the board of public sector banks.

“Maybe we are not able to do much with the fixed part of compensation package but variable part we are hopeful that in the next financial year we will be able to introduce a far more attractive package which will have bonuses, ESOPs and other performance linked incentives as part of the package,” he had said.

He said the monetary or non-monetary benefits, attracts the youth and experienced professionals to enter public sector banking space.

Even the RBI ex-Governor, Raghuram Rajan also made a case for issuing ESOPs to bank staff.

“With public sector banks’ shares trading at such low levels, a small allocation to employees today may be a strong source of motivation, and can be a large source of wealth as performance improves,” Rajan had said.

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