Kolkata: In a potential setback to the image of two public sector lenders, majority of workers and officers of Allahabad Bank and United Bank of India are opposing the proposed allotment of shares under an employee stock purchase scheme (ESPS) on grounds that it will lead to a dilution of the government’s ownership.
The two banks are looking to allot up to 50 million shares in each to their employees. Whereas Allahabad Bank is looking to raise Rs300-350 crore through the allotment of shares, United Bank is planning to mop up around Rs85 crore.
The aim is to create a new investor class while creating an incentive for employees, said a key official at Allahabad Bank, who asked not to be identified.
It will be an embarrassment for Allahabad Bank and United Bank if their ESPS schemes, a first for public sector banks, fail to get support from their employees. It may be seen as lack of confidence among their own employees and make it more difficult for these lenders to raise risk capital said key executives, who asked not to be named.
Even as the banks decide on the modalities of the share allotment, officers and workers said they were opposed to the move. Only the All India Bank Officers’ Confederation, an apex body of officers from across banks, has decided to support the share allotment to employees.
Dilution of stake isn’t a problem as long as control remains with the government, said Dipankar Mukherjee, the association’s former general secretary and a retired officer of United Bank. “Our union has always extended support to moves aimed at incentivizing employees,” he said, adding that it is a better idea to raise capital from among employees than from the market.
Other apex unions, however, have decided to oppose the share allotment. The All India Bank Officers’ Association has always opposed share sales by public sector banks because it leads to dilution of government ownership.
Share allotment to employees is in no way different, said Nirmal Dutta, West Bengal state committee president of the union. When United Bank went public in 2010, employees were offered shares at a discount, recalled Dutta. When the share price zoomed, employees cashed out, he said.
Pradip Biswas, general secretary of Bank Employees’ Federation of India, said his union, too, would oppose the move on the same grounds. Even if the shares allotted to employees under ESPS scheme have lock-ins initially, these shares eventually become freely tradable, he said.
The government owns 68.32% in Allahabad Bank and 86.81% in United Bank.
Rajen Nagar, national president of the All India Bank Employees’ Association, said his union is opposed to the move because such schemes have typically been found to be discriminatory based on grade and performance.
The Allahabad Bank officer cited above, however, said the apprehension is misplaced. Allahabad Bank’s ESPS scheme will be open to employees of all grades and will not be linked to performance, this person said.