Many mid-management officers are due to retire over the next five years.
State-run lenders like Bank of Baroda and IDBI Bank are planning to offer stock options to staff in a bid to retain top talent. This assumes significance in the backdrop of the imminent entry of 21 new niche banks which have been granted licences by the RBI to begin operations, as well as the prospect of a clutch of mid-management professionals reaching retirement age soon.
For instance, IDBI Bank, which has started to transform itself by realigning its business, has also drawn a roadmap for human resources.
The lender, which is planning to increase the employee strength to 21,500 by March 31, 2019 from the 15,500 at present, is not only working out a scheme for career progression but also mulling an employee stock option plan (ESOP) to incentivise them, said Kishor Kharat, MD and CEO, IDBI Bank. Bank of Baroda MD and CEO P.S. Jayakumar said the bank was considering an ESOP for its employees which could bridge the compensation gap between public and private sector employees.
“In general, at a lower level, public sector institutions pay better than their counterparts. But while progressively going up (in the rank), there is a gap that is arising and at a senior level, the gap really becomes unmanageable,” Mr. Jayakumar said.
The board had already approved the ESOP. Now, the bank will write to the government for its approval.
“We need to create a variable incentive system without creating perverse economic interests. If we can get an ESOP plan, then, at least it will cover some part of the gap,” Mr. Jayakumar said.
State Bank of India (SBI), the country’s largest lender, had floated the idea of ESOP for its employees some time ago. However, the proposal is still awaiting government’s approval.
Most banks plan to offer stock options to their employees in the rank of assistant general manager and above.
Union Finance Minister Arun Jaitley had said recently that the government was actively discussing the proposal for Employee Stock Ownership Plan (ESOP) for public sector bank employees.
“The government is considering (the proposal of ESOP for bank employees). It is in a very advanced stage. It has been a long-standing demand and is (under) active consideration,” Mr. Jaitley said at Gyan Sangam, the annual retreat for bankers, last week.
Public sector banks are facing headwinds on the human resources front as many mid-management officers are retiring over the next five years, prompting the central bank to term it a ‘retirement decade.’
In addition, the 21 new banks, which have received differentiated licences from the Reserve Bank of India (RBI), will try to poach employees from existing banks.
In August-September last year, RBI has granted licences to 11 payment banks and 10 small finance banks to start operations.
While these banks were given 18 months time to roll out services, most of these entities are expected to start operations in 2016.