Public sector banks have been allowed to decide on their own policy for providing housing loans for employees with the approval of the respective boards.
Announcing this, the Ministry of Finance conveyed to the Indian Banks’ Association (IBA) that the boards may also suggest if they feel this to be a part of wage negotiations.
The Department of Financial Services of the Ministry of Finance had earlier advised that housing loan to bank employees be negotiated strictly as part of the bipartite wage settlement.
But responding to an IBA communication, banks have now been given the option to either decide on their own or suggest if they feel this to be a part of wage negotiations.
The IBA has been advised "to take appropriate action to convey the same to all public sector banks for deciding the matter…''
IBA letter
The IBA communication to the Ministry had said that ‘the facility of loans to employees has now greater relevance''.
It would have a bearing on achieving the stated goals of improving their motivation levels and inculcating a sense of belonging; warding against poaching on staff by competitors; making a career in public sector banks more attractive; and retaining talent in banks.
The IBA communication recalled that private sector banks have been offering much better compensation to their employees than public sector banks, including housing loan at concessional rates.
Pricing of loan
“Compensation to employees in respect of housing loan may be extended by the banks to the extent of cost of fund incurred by the respective bank,” it added.
“As such, each bank may be allowed to formulate the staff housing loan policy with the approval of the board of respective bank, keeping the housing loan scheme to staff outside the purview of industry-level bipartite settlement.”