Public Sector Banks to Give Stock to Employees

Finance Ministry has agreed in-principle to allow public sector banks to offer stock options to their employees from next fiscal.

Employee Stock Option plans (ESOPs) could be given by those banks which have not only earned substantial profit but also made remarkable improvement in managing NPAs.

It will help motivate employees to work towards strengthening the financial status of their banks so that their share value rises.

Although the Finance Ministry has given in-principle nod, the finer details are being worked out like what percentage of profit can be earmarked for ESOPs.

One of the proposals is to issue shares equivalent to a certain percentage of banks’ net profit to employees which is being examined.

For large banks, the ESOPs could be as much as 5 per cent of profit after tax while for the smaller ones, it could be about 3 per cent but no decision has been taken yet.

Employee Stock Option Plans:

ESOPs are common in the private sector, where companies offer stocks to reward and retain key and top-performing employees.

Since the employees stand to benefit from any appreciation in stock price, ESOPs also help in aligning the interests of the employees with those of shareholders.

It can be monetary or non-monetary benefits to make it more attractive for professionals to enter public sector banking space.