The pace of share allotments to employees by private banks under ESOP (employee stock ownership plan) has gained pace in FY24 amid surging attrition rates in FY22 and FY23.

Most private sector banks such as ICICI Bank, HDFC Bank, Axis Bank and Kotak Mahindra Bank and some small finance banks have issued ESOPs since the beginning of the current financial year, in one or more tranches.

“ESOP allotments had slowed down during the pandemic as both employees and employers were grappling with uncertainty. We started seeing some issues from the second half of 2022 with momentum increasing in 2023,” an industry executive said.

During January-March, banks such as Bandhan Bank, YES Bank and Axis Bank has allotted shares under ESOPs.

Also known as ESOS (employee stock option scheme) or ESPP (employee stock purchase plan), ESOPs are typically offered by companies as employee benefit plans which give them ownership interest in the organisation by way of shares as direct stock, profit-sharing plans or bonuses.

Retaining talent

The increase in pace of ESOP issues are likely an attempt by banks, which are struggling with elevated attrition rates, as one of the incentives to retain key talent, industry participants said.

Some banks had also promised ESOPs during the pandemic period as a way to retain and attract talent, and with business conditions improving, are now fulfilling these obligations, they added.

Private banks’ annual reports for FY23 showed most lenders saw high employee turnover rates of over 30 per cent with that for Kotak Bank going up to 46 per cent. These levels are much higher than FY22 and a sharp increase from FY21 levels when turnover rates were at 15-29 per cent.

With competition for talent intensifying across banking and financial services and other sectors, FY23 has seen a rise in ESOP allotments by other large entities such as ICICI Lombard General Insurance and Paytm.

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