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Business News/ Industry / Banking/  Govt mulls ESOPs for PSB employees; decision expected after Lok Sabha election 2024, Deloitte to advise on framework
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Govt mulls ESOPs for PSB employees; decision expected after Lok Sabha election 2024, Deloitte to advise on framework

PSBs in India may soon offer stock options to employees as the government rekindles discussions on ESOP. This long-standing demand from PSB could help them retain talent in a competitive market. The decision is expected after Lok Sabha elections 2024 with a framework being developed by Deloitte.

A government official confirmed that the discussions were preliminary, and any decision on the proposal would be taken after the polls.Premium
A government official confirmed that the discussions were preliminary, and any decision on the proposal would be taken after the polls.

The government has rekindled discussions with public sector banks (PSBs) on offering stock options to eligible employees, reigniting hope for this long-standing demand of the lenders, according to a report by Economic Times.

Quoting sources familiar with the development, the Economic Times reported that the proposal to introduce employee stock ownership plans (ESOPs) has been on hold for some time, but it may gain momentum after the Lok Sabha elections. "There have been talks with the government last month on issues pertaining to PSBs, including ESOPs," a bank executive told ET, adding that lenders will soon present a framework to the government.

Livemint could not independently verify the development.

A government official, however, confirmed to ET that the discussions were preliminary, and any decision on the proposal would be taken after the polls. "Bankers informed us that they had appointed consultancy firm Deloitte to give them suggestions on this matter...We will wait for banks to come up with a structured framework and then discuss it further," the official further added, as quoted in the ET report.

There are currently 12 strong PSBs catering to the nation's financial needs. These include the well-established State Bank of India (SBI), Punjab National Bank (PNB), and Bank of Baroda (BoB). Other prominent players are Bank of India (BoI), Central Bank of India (CBI), and Canara Bank. Rounding out the list are Union Bank of India (UBI), Indian Overseas Bank (IOB), Punjab and Sind Bank (PSB), Indian Bank, UCO Bank, and Bank of Maharashtra (BoM).

The framework would consider various factors impacting state-run banks, with employee ESOPs being a long-standing demand of PSBs. They believe that this initiative will help them attract and retain talent amid intense competition from private lenders, the report added.

Experts suggest that stock options have proven their effectiveness in the private sector and could offer similar benefits to the public sector ecosystem.

While the government held some discussions on the ESOP issue in 2020, the proposal did not gain traction. The 2020 Economic Survey also advocated giving ESOPs to PSB employees, stating that it would enable them to become owners of the banks and incentivize them to embrace risk-taking and innovation.

In 2015, the government's Indradhanush framework for transforming PSBs also recommended ESOPs for top management.

 

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Published: 03 Apr 2024, 11:40 AM IST
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