HBA Scheme of Kerala State- Loans Sanctioned from 2009-10

Kerala State Government Employees including government teachers were being sanctioned House Building Advance (HBA scheme) from 2009-10 with concessional rate of interest.  Vide order FINANCE (HBA) DEPARTMENT G.O(P) No. 105/20 18/Fin Dated, 05.07.2018, Government of Kerala  directed employees to approach  scheduled commercial banks/ NBFCs functioning in the state to avail of House Building Advance (HBA) thereafter. 

What is the position of HBA scheme loans sanctioned to Kerala government employees from 2009-10? 

Along with the above direction, it was also agreed in principle to transfer the principal portion of the outstanding amount of House Building Advance (HBA Scheme) granted to State Government Employees, to Federal Bank Ltd and Punjab National Bank. In tune with the above decision, both banks signed a Memorandum of Understanding with Government of Kerala for facilitating the transfer.  Vide Circular No.82/2018/Fin dated 04/09/2018 of Finance (House Building Advance) Department, Government of Kerala, instructed both banks to verify KYC of employees who had availed House Building Advance.  Thereafter, the principal portion of outstanding HBA scheme loans was equally segregated among the Federal Bank Ltd and Punjab National Bank. 

The loans were segregated among the two banks as shown below:
Federal Bank Ltd – 6962 accounts with Rs.369,21,70,313/-
Punjab National Bank – 6963 accounts with Rs.376,54,55,290/-

The loans were taken over by the banks at an interest rate of 8.45% with one year reset.  On taking over the loan accounts, the banks transferred the amount to the government against an undertaking by the government to transfer the interest due on the amounts on a monthly basis to the respective banks. 

The loan portfolio is transferred to the above banks  by the Government of Kerala together with all rights, title and securities. However, mortgage or other security interest in the Loan portfolio will be continued to be held by the Government of Kerala for and on behalf of the Banks till closure of the loan.  Government of Kerala has executed an agreement with respective banks guaranteeing repayment of individual loans. The government may initiate suitable steps against employees who default in loan repayment. 

Does repayment burden increase for Kerala government employees who had availed loans under HBA Scheme? 

There will not be any additional financial burden for the government employees who had availed loans under the House Building Advance Scheme of Kerala state (HBA Scheme). The loan take over is an arrangement between Government of Kerala and the respective Banks.  The monthly deductions from the salary of employees towards the loans will remain unchanged.  There will not be any additional interest burden also for the employees. They shall continue to service the monthly EMIs promptly as per the original terms and conditions.  The loan take over by the banks is done at a higher interest rate compared to the interest rate at which the loan was sanctioned to the employees.  The difference in interest will be met by Government by making additional provision over and above the amount remitted by employees.  The employees  do not have to carry out any fresh equitable mortgage formalities or execution of documents.  As there is no mortgage involved CERSAI registration is also not required for this transfer of loans under HBA scheme. 

These details were announced vide  the G.O.(P)No.150/2018/Fin Dated, Thiruvananthapuram 25/09/2018. It was signed by Shri. Sanjeev Kaushik IAS, Principal Secretary (Finance Resources), on behalf of the Kerala State Governor. 

Government of Kerala had carried out a similar arrangement earlier with SBI  and Canara Bank on similar lines. Kerala State Government Employees Fresh Housing Loans under HBA Scheme