The Reserve Bank of India (RBI) has approved the State Bank of India?s (SBI) proposal to issue shares to its 2.3 lakh employees to raise over R800 crore, a move that is likely to prompt other public sector banks (PSB) to follow suit.
This is also expected to address the issue of wage hike demands from the employees to a certain extent.
SBI will shortly issue the shares under the Employees Share Purchase Scheme (ESPS) as the finance ministry has decided to expedite the move without seeking comments from the capital market regulator Sebi, official sources told FE.
Though SBI officials did not comment, it is learnt that the proposal is to offer shares to around 2.3 lakh employees of the bank at discount of around 15% of the prevailing market value of the share. It is also expected to give loans to employees for the same.
RBI norms also allow banks to give advances to employees to buy shares of their own companies under ESOP to the extent of 90% of purchase price of shares, or R20 lakh whichever is lower.
The issue was taken up at a meeting earlier this month chaired by the then finance minister P Chidambaram to review the performance of PSBs. The sources said Chidambaram asked all PSBs to similarly raise capital through ESPS, after citing the RBI?s green signal to them for raising capital through rights issue and issue of shares to employees under ESPS/Employee Stock Option Scheme (ESOS) without waiting for Sebi?s comments on such capital-raising plans.
The sources said SBI is expected to put on offer around 60 lakh shares, though the share allocation will be on the basis of staff seniority.
The bank employees? union has offered support to the proposal, they said, adding that it has been approved by the bank?s board.
The government holds 58.6% in SBI. Of the R14,000 crore that the government had infused into PSBs last fiscal, the SBI group had got R2,000 crore. SBI had raised R8032 crore through a qualified institutional placement in January.
The ministry?s move to go ahead on such moves without waiting for Sebi?s comments is because the latter is currently reviewing ESPS/ESOS norms, the sources said. Waiting for the regulator?s comments would lead to delays, and PSBs would anyway be complying with the existing and new Sebi norms.
Chidambaram had recently said PSBs would need capital worth R45,528 crore this fiscal. In the interim budget, the government had allocated only R11,200 crore for PSB capitalisation. The new government is likely to infuse additional capital of R6,000-8,000 crore in the forthcoming regular Budget.
Meanwhile, to meet their huge capital requirements, estimated to be between R5 lakh crore and R8 lakh crore in the next five years to meet the Basel-III requirements, PSBs are considering many ways to raise capital in addition to budgetary support.
Sebi had, in January last year, amended the ESPS/ESOS norms to ban listed firms from coming out with employee benefit schemes that involves acquisition of the company?s own securities (especially by employee welfare trusts) from the secondary market. This was to curb malpractices in share trading.
The firms, which had already come out with such schemes, were given time to align with the existing Sebi ESPS/ESOS norms. Last November, it issued a discussion paper on ESPS/ESOS and is holding consultations with stakeholders to revamp these norms. Due to these consultations, it had extended till June 30 the deadline for alignment of existing employee benefit schemes with its norms.
Under ESOS, the company gives its stock option to employees who can then exercise the option only after a specified period. Under ESPS, the company offers shares to its employees as part of a public issue or otherwise. Employees can take part in it through a salary deduction plan carried out between the offer and purchase dates. The company then buys its shares on behalf of the employees using the collected funds. Unlike ESPS, ESOS has a call option that is exercised at a given date and is not in lieu of salary.
