Suppose a company has a loan policy and also preserves loan applications in writing. Now, suppose an employee takes a loan from the company and after paying some installments, the employee resigns for some reason with a notice period. In such a case, how can the company recover the outstanding loan amount from that employee? Can it be recovered from the nominee? Is it legal?
From India, Ahmedabad
Acknowledge(0)
Amend(0)
From India, Ahmedabad
Acknowledge(0)Amend(0)
Hi,
In general, many companies make loan policies applicable to employees only after completing a considerable number of years of service. This means an employee will become eligible to apply for a loan only after completing the stipulated period of service.
The next criterion is that the quantum of the loan should be sanctioned based on the employee's current Cost to Company (CTC).
The third criterion is that you can request a letter from the employee regarding the loan amount and details about the EMIs. If the loan amount is on the higher side, obtain a self-declaration on a 100 Rupee stamp paper stating that the employee will repay the loan within the stipulated period.
In the case of resignation, the Full and Final Settlement (FFS) can be withheld. Obtain a cheque/DD from the employee for the balance amount, and once it is cleared, the FFS can be released.
From India, Madras
Acknowledge(0)Amend(0)
1015In general, many companies make loan policies applicable to employees only after completing a considerable number of years of service. This means an employee will become eligible to apply for a loan only after completing the stipulated period of service.
The next criterion is that the quantum of the loan should be sanctioned based on the employee's current Cost to Company (CTC).
The third criterion is that you can request a letter from the employee regarding the loan amount and details about the EMIs. If the loan amount is on the higher side, obtain a self-declaration on a 100 Rupee stamp paper stating that the employee will repay the loan within the stipulated period.
In the case of resignation, the Full and Final Settlement (FFS) can be withheld. Obtain a cheque/DD from the employee for the balance amount, and once it is cleared, the FFS can be released.
From India, Madras
Acknowledge(0)Amend(0)
Thank you for your reply sir, what if company has not maintained the 100 rs stamp paper for the same?
From India, Ahmedabad
Acknowledge(0)Amend(0)
From India, Ahmedabad
Acknowledge(0)Amend(0)
In this case the employee resigned. So the dues shall be recovered either in F&F or prior to F&F. Recovering form nominee does not arise.
From India, Hyderabad
Acknowledge(0)Amend(0)
From India, Hyderabad
Acknowledge(0)Amend(0)
Under the general rule, for all employees covered under the Payment of Wages Act, the total deduction cannot exceed 50% of gross wages (75% if paying to a coop society). However, in the case where the employee has resigned, the last payment can be fully deducted to settle the outstanding loan.
It is essential to review the documentation of the loan. If there is evidence that the loan was not related to the employment, then you cannot withhold the settlement for the outstanding loan.
Moreover, amounts like PF and Gratuity can be adjusted for any outstanding loans. If necessary, you may need to file a civil suit after the payment to recover the same.
From India, Mumbai
Acknowledge(0)Amend(0)
It is essential to review the documentation of the loan. If there is evidence that the loan was not related to the employment, then you cannot withhold the settlement for the outstanding loan.
Moreover, amounts like PF and Gratuity can be adjusted for any outstanding loans. If necessary, you may need to file a civil suit after the payment to recover the same.
From India, Mumbai
Acknowledge(0)Amend(0)
Dear Laxmi,
Employees request loans, either short-term or long-term. It is purely at the discretion of management. When a loan is given, the lender must secure its repayment. If they do not pay sufficient attention to it, the employer suffers.
A short-term loan is for a maximum period of 6 months. It can be against the annual bonus, otherwise not more than 50% of the employee's wages for the next 6 months.
A long-term loan should not be provided by the employer as it is not their business. They can arrange with a bank or cooperative bank to allow employees to get loans from there. Even if the employer gives a long loan, it should be for a large amount for purchasing assets like a car or house. The company can then mortgage that asset so that if the employee separates, there is a balance amount to be repaid, and the asset remains with the company, ensuring the company's safety.
Vibhakar Ramtirthkar.
From India, Pune
Acknowledge(0)Amend(0)
Employees request loans, either short-term or long-term. It is purely at the discretion of management. When a loan is given, the lender must secure its repayment. If they do not pay sufficient attention to it, the employer suffers.
A short-term loan is for a maximum period of 6 months. It can be against the annual bonus, otherwise not more than 50% of the employee's wages for the next 6 months.
A long-term loan should not be provided by the employer as it is not their business. They can arrange with a bank or cooperative bank to allow employees to get loans from there. Even if the employer gives a long loan, it should be for a large amount for purchasing assets like a car or house. The company can then mortgage that asset so that if the employee separates, there is a balance amount to be repaid, and the asset remains with the company, ensuring the company's safety.
Vibhakar Ramtirthkar.
From India, Pune
Acknowledge(0)Amend(0)
In our organization, the loan policy is that we give a loan which is not more than one month's salary, and the loan is given only after another employee, whose salary is equal to more than the loan amount, provides a written undertaking that in case of default, he will repay the loan.
Members have also raised other aspects.
Col. Rathi
From India, Delhi
Acknowledge(0)Amend(0)
Members have also raised other aspects.
Col. Rathi
From India, Delhi
Acknowledge(0)Amend(0)
Recovery of a loan to an employee from his/her nominee comes into force only after the demise of the employee and not during his lifetime if he/she has left the services of a company to join any other company/organization.
The nominee shall step into the shoes of the employee only upon the demise of the employee, and they are required to repay the deceased employee's loan only to the extent of what they received in succession after his/her demise and not otherwise.
If the employee is alive and has joined another company, the only course for recovery is to file a money recovery suit with the appropriate forum. Success in this process will depend on whether the company has all the documents related to the loan application, actual disbursement of funds through cheques, and details of any partial repayments made from monthly salary deductions.
Jawaharlal Moondra
98290 28028
From India, Jodhpur
Acknowledge(0)Amend(0)
The nominee shall step into the shoes of the employee only upon the demise of the employee, and they are required to repay the deceased employee's loan only to the extent of what they received in succession after his/her demise and not otherwise.
If the employee is alive and has joined another company, the only course for recovery is to file a money recovery suit with the appropriate forum. Success in this process will depend on whether the company has all the documents related to the loan application, actual disbursement of funds through cheques, and details of any partial repayments made from monthly salary deductions.
Jawaharlal Moondra
98290 28028
From India, Jodhpur
Acknowledge(0)Amend(0)Looking for something specific? - Join & Be Part Of Our Community and get connected with the right people who can help. Our AI-powered platform provides real-time fact-checking, peer-reviewed insights, and a vast historical knowledge base to support your search.