Public Sector Bank Employees gets Employee Stock Purchase Plan

Bank of India on Saturday said the Securities and Exchange Board of India has permitted it to adopt the “Issuance of equity shares through ‘Employee Stock Purchase Scheme'” as a method to comply with the norms of Minimum Public Shareholding (MPS) as required under the Securities Contracts (Regulation) Rules.

Rule 19A of the Securities Contracts (Regulation) Rules, 1957 pegs the minimum public shareholding (MPS) in a company at 25 per cent. According to SEBI’s letter to the bank: “It has been decided to accede to your request to adopt issuance of up to 10 crore fresh equity shares directly to permanent employees through Employee Stock Purchase Scheme…as a method…to comply with MPS norms. This shall not be treated as a precedent. The approval is subject to the bank obtaining due approvals of Reserve Bank of India and Government of India.”

What is an ‘Employee Stock Purchase Plan – ESPP’

An employee stock purchase plan (ESPP) is a company-run program in which participating employees can purchase company shares at a discounted price. Employees contribute to the plan through payroll deductions, which build up between the offering date and the purchase date. At the purchase date, the company uses the accumulated funds to purchase shares in the company on behalf of the participating employees.

As at June-end 2018, the government held 83.09 per cent stake in the public sector bank and the balance was held by the public.

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