Staff loaning and its applicable laws within India - looking for detailed information and agreement format - CiteHR

I am looking for detailed information with respect to staff loaning and its applicable laws within India. if you can share with me an agreement towards the same, it will be really useful, any additional information, which you might want to add on is welcomed.
From India, Mumbai
Dinesh Divekar
Business Mentor, Consultant And Trainer
Labour Law & Hr Consultant
Hr Manager

Dear Bhawana,

Disbursement of the loan to the employee is an internal matter of the company. Each company has the freedom to decide on the amount of the loan, method of recovery or the number of instalments to recover the loan. The policy differs from one company to another. It is out of the purview of the labour laws of India.

However, if the employee enters into the agreement for the repayment of the loan and if he/she fails to do so then the company can make a police complaint. However, it becomes a civil case and it is out of the purview of the labour laws.


Dinesh Divekar

From India, Bangalore

Regarding staff loan, no applicable labour laws are in place. You may have to devise suitable HR policies in place, for proper administration of Loan. You can introduce different types of loan, like Vehicle loan (purchase of 2-wheeler, 4-wheeler etc). Some companies have loan scheme like this, which is also interest free, for the benefit of their staff. Only thing the staff need to ensure that, the vehicles purchased using loan facility by the company, shall have to be hypothecated in the name of company, till the loan amount is recovered in full. Some companies may impose a simple interest (lower than the bank rate) for staff loan.

Similarly, you can also introduce other loaning such as, self-education loan, personal loan,

marriage loan, for the benefit of staff., subject to ceiling, at the discretion of management, and loan amount subject to the cadre of staff.

From India, Aizawl
Dear Bhavana,
I am not sure what in your mind was when you framed the question. Actually whether it was giving loans and advances to employees or lending their services to other organizations.
Loans and advances to employees falling within the purview of the Payment of Wages Act,1936 are covered by sections 12 and 12-A of the Act respectively. That apart, certain State Shops & Establishments Acts have provisions pertaining to sanction of loans and advances to the persons employed and recovery thereof.
It is better we get a clarificatory response from your end.

From India, Salem

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