Public sector banks dip into employees’ pockets for capitalhttps://indianexpress.com/article/business/banking-and-finance/public-sector-banks-dip-into-employees-pockets-for-capital-5644493/

Public sector banks dip into employees’ pockets for capital

Staff alleges forceful subscription of shares under stock purchase scheme.

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PSU banks have raised or are in the process of raising around Rs 5,000 crore from employees through the employee stock purchase scheme (ESPS) amid allegations of coercion by bank managements for forceful subscription of shares.

Banks employees are willy-nilly contributing to the bailout of public sector banks hit by huge bad loans and losses. PSU banks have raised or are in the process of raising around Rs 5,000 crore from employees through the employee stock purchase scheme (ESPS) amid allegations of coercion by bank managements for forceful subscription of shares.

Some of the banks are arranging loans to their employees through other banks for subscribing to their shares. While some banks were offering discounts on the shares, employees of banks complained of coercive methods and branch-wise targets to raise the money. “Through ESPS, employees of PSU banks are forced to buy shares without analysing the buying capacity. Two banks have signed up with another bank to provide personal loan to their employees that too by violating the norms,” said a bank employee who didn’t wish to be named.

PSU banks which have availed of or planned the ESPS scheme to raise funds from employees include Allahabad Bank (Rs 315 crore), Union Bank (Rs 470 crore), Punjab National Bank (Rs 500 crore), United Bank of India, Syndicate Bank (Rs 538 crore), Bank of India (Rs 660 crore), Central Bank of India (Rs 270 crore), Oriental Bank of Commerce, Indian Bank, Bank of Maharashtra and Canara Bank (around Rs 1,000 crore). “Branch-level bankers are being harassed over their unwillingness to buy banks shares. The management is forcing to take loan and buy shares under the ESPS scheme,” said another employee of a PSU bank who preferred anonymity. “Regulations do not allow banks to offer loans to their own employees for purchasing shares under ESPS. Two banks have informally told their employees that they may take loans from Canara Bank should they want to purchase shares,” complained the staffer of a nationalised bank.

Most of the PSU banks have either raised funds or are in the process of raising funds through ESPS issues. “The object of the issue, apart from raising of long-term resources is to enable the bank to attract, retain and reward employees for our bank by sharing the value created by them and to motivate them to contribute to the growth and profitability of the company,” Bank of Baroda said in an exchange filing. “Besides, the fund mop-up aims to shore up the capital adequacy and to fund the general business needs of the bank,” BoB said.

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Unions have come out against the share issues to employees. “They talk of sense of commitment to the bank. As employees, we do owe a sense of commitment to our duties and responsibilities but we do not believe that by purchasing some shares of the bank, we will be more committed to the Bank. We are always loyal and committed to the banks, even without owning some shares of the bank. Holding some shares of the bank will not add to our sense of commitment to our bank,” said CH Venkatachalam, General Secretary, All India Bank Employees Association (AIBEA).

A section of employees feel that PSU banks and the government are using employees to recapitalise the banks which recklessly gave loans to shady promoters who in turn defaulted on the loans and some even fled the country. “They talk of selling the shares for profit when the share price goes up. Some managements are even tempting the employees that they can make profit by selling the shares when the prices go up. If the shares are to be sold when prices go up, then what will happen to the theory of sense of ownership? They want employees to become greedy and run after money,” Venkatachalam said. Ramnath Pradeep, former Chairman and MD of Corporation Bank, said, “This scheme is supposed to be voluntary, and not mandatory. As there’s a lock-in period of one year, employees may not be very enthusiastic. If there’s no discount, why would somebody go for the share. You can always buy from the stock market.”

A Bank of India official said, “The ESPS offer to employees was completely voluntary. It was offered at a discount of nearly 25 per cent. Around 2,600 employees did not subscribe to the offer.” Refuting reports of coercion, a senior Syndicate Bank official said the issue which was offered at 25 per cent discount was a success with the bank raising around Rs 538 crore. “Employees were not forced to subscribe to the bank’s employee stock purchase scheme. The subscription was purely voluntary,” he said. PNB, Allahabad Bank, Union Bank and Oriental Bank of Commerce did not respond to the mail sent by The Indian Express.