Canara Bank's new loaning scheme a master stroke to dilute the government's stake presence in shares
Under Employee Stock Purchase Scheme (ESPS) Union Bank of India and Bank of India have made negotiation which allows their employees to take a collateral free loan from the Canara Bank as the law does not abide employees to take a credit from the same bank to buy shares under the name of ESPS. Canara Bank introduced this scheme in the mid of January for BOI employees. ESPS is the way of diluting the number of shares owned by the government in the state-owned banks.
Informally, the employees were told if they want to buy the shares they need to take a loan from Canara Bank
This move caused Bank Of India to pay their employee in the middle of the month so have funds to buy the required shares.
Union Bank of India aims to raise six hundred crores from the shares with the buying cost up to eight crores. On the other hand Bank of India aims to raise eight hundred crores by providing equity shares to the public starting at 80 Rs per share.
The principal amount of newly introduced loaning scheme by Canara Bank is the average of 10 months of the employee’s salary. There are no mentions of share purchase the bank describes this loaning scheme as the help for the employees to meet their domestic and personal needs. In addition to this, the last date to avail this loaning scheme is March 9, 2019, making it clear that it came to existence for the specific purpose only.