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Dear Seniors,
Please let me know if any of our employee defaults on bank loans and if the said bank approaches the companys HR department then what is the right procedures.
if the employee has signed on the right of lien on the salary account then do we adhere on the procedures of deduction of the amount from the employees account.

From India, Mumbai
Vijay_s12us - This is a conceptual question right? If an employee has used his salary account for obtaining a loan, it's his responsibility to clear the loan and not the organizations.
The process of deduction is either a deduction from the salary account via ECS or through the cheque clearing system. The salary that is paid by you to your employee is obligation free and it's the responsibility of the employee to clear his or her loan and not yours

From India, Mumbai
The payment of wages is very clear

you can not made any deduction from wages of the employee other than those specified in Sec 7 of the act.

With reference to a bank loan, you can make deductions and pay the money to the bank only if there is a request from the employee to do so and till the time the employee does not revoke the request. Even if the request is made by the employee, the company is under no obligation to do so and most companies will not do it.

So deduction on instruction or request of the bank is out of the question, unless the employer was a guarantor of the loan and is liable to pay it on their own account and entitled to recover from the employee.

Lien on a bank account (whether it is a salary account or a saving account) does not concern the employer. In fact, I dont think there is any such concept. The banks do not / can not give a lien on any account. What the employee does with the money in his salary account (which is actually a normal bank savings account) is his concern not the employers.

The bank needs to approach the court and get orders from the court to attach his salary (which again, the courts will be very reluctant to give) then only the employer needs to act accordingly.

From India, Mumbai
You did not mention if the bank is a co-operative bank, under the Co-Operative Societies Act, 1960. However, if the bank is Co-operative Bank registered under the Co-Operative Societies Act, 1960, and if the bank has made a requrisition under Section 49 of the said act along with a concent or authorization by the employee drawn in favour of the employer, then it become mandatory for the employer to effect such deduction subject to the provisions of Payment of Wages Act,1948. If the employer do default in deduction of loan and remittance it to the bank, in such case the employer is become liable for payment of loan amont.
From India, Mumbai
I think deduction specified in payment of wages act sec 8 is only for payment made to a cooperative credit society of the company employees and specifically recognised. It does not cover banks
Secondly the employees can revoke his consent at any time in case of payment to a bank. Only in case of the coop credit society he does not have that option

From India, Mumbai
Affecting deductions for loan taken by employee from cooperative bank is mandatory fro employer, if the bank has so informed. Total maximum deductions of wages can be 75% of the gross wages in such case.
From India, Mumbai
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