Introduction of ESOP in PSBs

INCENTIVES FOR PUBLIC SECTOR BANK EMPLOYEES

It is an accepted fact that the motivational level at a Public Sector Bank is at Zero level.  How to overcome this?  Here is a proposal from the Indian Banks Association in consultation with Finance Ministry.

EMPLOYEE STOCK OPTION PLANS 

Possessiveness is increased through inducting the employees in to the business.  The introduction of ESOPs for PSBs is proposed to retain the talents which is proposed to introduced in select banks, which make profit.

As in principle approval has been given by the Finance Ministry for allowing the PSBs to offer stock options to their employees from 2017-18.  The issue after discussing with IBA has been finalized which again will depend on the banks’ performance parameters, along with other factors.  As of now the matter is with the Central Bank, ie., RBI for its approval.  How does it work?

1. ESOPs is proposed to be extended from the level of Deputy General Manager and Additional General Manager to the star performers.
2. It will be made available to the bank who make profit and manage NPAs well, within a defined proportion of the Net profits.
3. A share of net profit will be reserved towards ESOPs, which is likely to be 5% and 3% in cae of large and small banks respectively.
4. This will address the issue of crunch in talents, in PSBs faced due to entry of Payments Banks in the market.
5. The introduction of ESOPs will bring a sense of ownership in the minds of employees.
6. The benefits proposed would be both monetary and non-monetary benefits.

Further it is proposed that the Department of Financial services which have drafted the ESOP frame work will discuss the final outline with the Banks Board Bureau (BBB) and take a final decision.  Also there are plans to introduce additional bonus and performance linked packages, as suggested by BBB.

It may be noted that ESOP is already in vogue in Private Sector Banks.