The government has recently formed a committee tasked with recommending the modalities under which government employees can avail home loan from state-run and private commercial banks.
The body, named “Loan Negotiation Committee,” has been formed following special directives from Prime Minister Sheikh Hasina.
Earlier, the national pay commission, which recommended pay hikes for public servants, and a secretarial committee, which reviewed the commission’s proposals for the recently approved 8th pay scale, both said government employees should be able to avail home loans from commercial banks at rates fixed by the Bangladesh Bank.
On Tuesday, Subbrata Sikder, senior assistance secretary to the Housing and Public Works Ministry, issued a circular regarding the formation of the five-member committee.
The committee is led by GM Jainal Abedin Bhuiyan, chairman of Rajuk. The other members are member (administration) of the National Housing Authority, a joint secretary of the ministry, director (finance) of Rajuk and a deputy secretary to the Finance Ministry.
As the name suggests, the committee will negotiate with the state-run and private commercial banks about how the government employees could avail home loans and submit a report in 15 days.
An official of the government’s Finance Division said the Public Works Ministry will try to fix a flat 12% interest rate for home loans which is thought to be viable for the government employees.
However, the entire process of formulating a guideline in this regard and installing a monitoring process so that loans are not misused will take two to three years, the official said.
According to the ministry circular, the committee will develop a scheme to bring funds from commercial banks for the 2.1 million civil servants and how local private sector real state developers can relate to the larger loan projects.
At present, the rate of interest for home loans from private commercial banks varies between 10.75% to 14%.
Under existing banking rules, personal home loans could be of Tk10 lakh to Tk1 crore depending on the income of the applicant.
Another official of the Finance Division said requesting anonymity: “A huge sum of money is lying idle with the commercial banks. A proper use could be funding the buying of flats of 2.1 million public servants.”
According to Bangladesh Bank data, the surplus liquidity in the country’s banking system stood at Tk152,900 crore at the end of August this year.
The Dhaka Tribune has learned that the government wants to be the guarantor of home loans taken by its employees.
But under existing arrangements, an organisation cannot be the guarantor of a personal loan; only another individual can give the guarantee.
However, government officials said this problem can be overcome if the commercial banks provide the funding as project loans, which can then be disbursed among employees as home loans.
Currently, public servants can avail a highest Tk1.2 lakh loan at 10% interest for residential purposes. This should be equivalent to 36 months’ basic pay of a government employee but cannot be more than Tk1.2 lakh.
The government keeps a separate allocation in the annual budget every year for this purpose.
One of the recommendations of the secretarial committee, that recently reviewed the pay commission’s proposals, was to provide additional financial facilities to civil servants willing to purchase apartments outside the metropolitan cities.
