Maulin Suthar
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. So 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
Partner - Risk Management
Sr.manager - Hr&admin
Hr Freelancer
Maulin Suthar
Hr Executive
+2 Others



In general many companies make loan policy applicable to employee only after completing considerable years of service which means employee will become eligible to apply for loan after completing stipulated period of service only.

Next criteria the quantum of loan should be sanctioned based on his current CTC.

Third criteria is that you can take a request letter from the employee about the loan amount and also about EMI's details. If the value of loan amount is on higher side get a self declaration in 100 Rupees stamp paper that he will pay back the loan within the stipulated period.

In case of resignation his FFS can be withholded take a cheque/DD from him for the balance amount and once it is cleared FFS can be released.

From India, Madras
Maulin Suthar
Thank you for your reply sir, what if company has not maintained the 100 rs stamp paper for the same?
From India, Ahmedabad

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

under the general rule, for all employees covered under payment of wages act, total deduction can not exceed 50% of gross wages (75% if he is paying to coop society). But in case the employee has resigned, the last payment can be fully deducted in settlement of the outstanding loan.

However, the documentation of the loan must be seen. If there is evidence that the grant of loan was not connected with his employment, then you can not hold back his settlement for the outstanding loan.

Further, things like PF and Gratuity can to be adjusted for any such outstanding loan. You will need to file a civil suite after the payment to recover the same.

From India, Mumbai

Dear Laxmi;
Employees request for loan. Either short term or long term. It is purely and simply discretion of management. When a loan is given, lender must secure its repayment. If he does not pay sufficient attention to it, employer sufferes.

Short term loan is for a max period of 6 months. It can be against annual bonus. Otherwise not more than 50% of his wages for next 6 months. .

Long term loan is not to be given by employer. It is not his business. He can arrange with a bank, cooperative bank and let the employees get loan from bank. Even if employer gives long loan, it is of a large amount out of which employee is buying some asset, car, house, etc. Company can get that asset mortgaged so that while separating the employee has balance amount to be repaid, the asset is with the company. Company is safe.

Vibhakar Ramtirthkar.

From India, Pune
Suresh Rathi

In our organization , the loan policy is that we give loan which is not more than one months 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 in case of default , he will will the loan.

Members , otherwise have brought out other aspects


From India, Delhi

Recovery of loan to an employee, from his/her nominee comes in to force only after demise of the employee and not during his life time, if s/he has left the services of a company to join any other company/organization.

The nominee shall steps in to the shoes of employee only on demise of the employee and they are required to pay the loan of a deceased employee only to the extent of what they got in succession after his/her demise and not otherwise.

If the employee is alive and has joined any other company, then the only course for recovery is to file a money recovery suit with appropriate forum and that will be successful only if the company has all documents pertaining to applying the loan, actual disbursement of amount thru cheque/s and details of partial recovery, if made from monthly payout against the salary month-on-month.

Jawaharlal Moondra
98290 28028

From India, Jodhpur

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