Markets: Eerie calm

Markets: Eerie calm

it is not clear when market sentiment can change; as in the past, it can be quite sudden.
At a turn and yet not

At a turn and yet not

RBI could be tempted to cut policy rate to support growth at its bi-monthly review.

SBI to raise Rs 800 crore by issuing shares to employees

May 23 2014, 17:10 IST
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SummaryLender gets RBI nod; may prompt other PSBs to follow suit

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

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