This is a ticklish issue. Whether to keep on board a medically unfit person or to remove him, is a call that your management has to take. If allowed to continue his employment, it will send a signal to all the employees that your management is empathetic. If for removed, it will help you in keeping manpower lean. However, I propose the following options:
a) Let the employee apply for Leave Without Pay (LWP). He might forego the salary nevertheless, his employment will be continued. Issue him a letter stating that this arrangement is made only to increase his length of service in the company and there is no guarantee that he will be allowed to work once he becomes medically fit. Longer length of service will help him in searching a job once he becomes medically fit. Since you are not paying any salary to the employee, your management should not have any objection to this arrangement. Keeping a person on roll even though without salary is also a help in itself.
b) Explore possibility of alternate employment. Can he work in security or any other department? Of course, security requires able-bodied persons, however, ability of the able-bodied security persons is well known. Discuss this issue amongst the HODs and find out whether any idea emerges.