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In a move that is the first of its kind in the public sector banking space, State Bank of India plans to roll out an employee stock option scheme (ESOS) for its 2.19 lakh employees.
Even as the scheme is in the works, India’s largest bank has dropped its earlier plan to come out with an employee stock purchase scheme.
The move to offer ESOS is aimed at motivating employees to perform better as also to attract and retain talent.
Competition to attract experienced bankers has intensified with the Reserve Bank of India (RBI) granting “in-principle” approval in April to IDFC and Bandhan Financial Services to set up banks in the private sector. The central bank is also expected to issue universal bank licences on tap.
On the status of stock purchase scheme, SBI Chairman Arundhati Bhattacharya, in an interview with BusinessLine , said: “Actually, then (in March 2014) I had talked about ESPS. At that point, our shares were at a very low price and it would have made sense. But since then the price has improved and it is difficult for employees to purchase now.”
Therefore, SBI is now considering an ESOS, that will give an employee the right to purchase or subscribe to the securities offered by the bank at a future date, and at a predetermined price.
The SBI chief said her intention is to make ESOS available to all employees and quickly. “We have to find out performance parameters for every job. So, that is a big job. We are looking at how that can be done,” she said.
The Finance Ministry is agreeable “in-principle”. “We have to take permissions from others, including the RBI. The way it will be done will have to be advised to the ministry and final approval got,” she said.
The SBI chief said that if an employee performs in line with the target given to him/her then he/she will get a certain number of options, which will be locked in for a period of time, say one year. “If it hasn’t gone up by then that means you (employee) have not worked hard enough for the company. So, to make it go up, you have to work hard,” Bhattacharya said in a lighter vein.
Stock splitOn the possibility of SBI going in for a stock split, she said: “How do you know we are not doing it? These are things that we will do when we think the time is right.”
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