8th Pay Commission: Along with salary hike, various types of advances are also important for central government employees which help them meet their financial needs. The 7th Pay Commission (7th CPC) provided various types of low-interest advances to the employees, with a total limit of up to ₹27.5 lakh. Now, when the process of formation of the 8th Pay Commission has started, the question arising in the minds of the employees is whether the limit of these advances will increase or their terms will change?
Low interest advances available in 7th Pay Commission
The 7th Pay Commission provided advances at low interest rates to central government employees for certain purposes. These mainly include:
- House Building Advance (HBA): This is one of the most important advances under which employees can avail loan to construct or purchase a new house. In 7th CPC, its maximum limit was up to ₹25 lakh , which was determined on the basis of 34 times the basic pay of the employee or the cost of the house or the repaying capacity, whichever is less. The interest rate on this advance ranged from 6% to 9.5% depending on the loan amount.
- Personal Computer Advance (PCA): Employees also got an advance to purchase personal computers. Its limit was ₹50,000 or the actual price of the PC, whichever is less. Employees could avail this advance a maximum of five times during their entire service period, thus taking the total limit to ₹2.5 lakh. The interest rate on this is currently 9.1%.
- Motor Car/Motorcycle/Scooter/Moped Advances: Advances were also available to employees for purchasing vehicles, the amount and interest rate of which depended upon the type of vehicle and pay scale of the employee.
Thus, a central government employee under the 7th Pay Commission could have availed a low-interest benefit of up to ₹27.5 lakh (₹25 lakh HBA + ₹2.5 lakh PCA) in total through these advances during his service career.
Interest-free advances abolished by 7th Pay Commission
It is important to note that the 7th Pay Commission had abolished 12 types of interest-free advances. The Commission believed that these small advances had lost their relevance with the increase in wages and were costly to administer. Some of the major interest-free advances that were abolished included:
- Bicycle Advance
- Warm clothes in advance
- Salary Advance on Transfer
- Festival advance
- natural calamity advance
- Leave Salary Advance
- Advances for legal cases
However, certain essential interest-free advances such as for medical treatment, travelling allowance (on tour/transfer), leave travel concession (LTC) and travel allowance for the family of a deceased employee were continued.
Expectations from 8th Pay Commission
Now that the 8th Pay Commission has been constituted, central employees are hopeful that the Commission will not only increase their pay and allowances but also improve the system of advances. Some of the major expectations of the employees are as follows:
- Hike in HBA limit: Given the rising prices of houses, employees are expecting a significant increase in the maximum HBA limit to enable them to buy or build their own home. Some reports suggest the limit may rise to ₹30 lakh or more.
- Increase in PCA limits and relaxation in conditions: Given the importance of technology, employees can expect an increase in PCA limits and permission to avail it more frequently.
- Reduction in interest rates: Employees want the interest rates on these advances to be further reduced to make it more affordable for them.
- Restoration of certain interest-free advances: Some employee organisations have also demanded restoration of certain essential interest-free advances that have been abolished, especially for medical treatment and natural calamities.
8th Pay Commission: Possible Scenarios
Though the 8th Pay Commission recommendations are yet to come, here are some of the possible scenarios considering the current economic scenario and demands of the employees:
- Marginal increase in HBA limit: The government may increase the limit of house building advance slightly, perhaps from ₹27.5 lakh to between ₹30-₹35 lakh.
- Changes in PCA terms: The limit for personal computer advance is unlikely to be increased, but there could be some relaxation in its terms, like increasing the frequency of availing it or reducing the interest rate slightly.
- Status quo on interest rates: The government may maintain the current interest rates on these advances, especially given the fiscal pressure.
- Restoration of interest-free advances unlikely: The discontinued interest-free advances are unlikely to be reintroduced as the 7th Pay Commission had recommended their abolition citing cost savings and lack of relevance.
conclusion
The 7th Pay Commission provided low-interest advances of up to ₹27.5 lakh to central employees, which proved to be helpful in meeting their financial needs. Now, with the 8th Pay Commission, employees are expecting that the limit of these advances will increase and the terms will be even more favourable. While the final decision will depend on the recommendations of the commission and the government’s approval, it is certain that the advances will continue to be an important benefit for central employees. Employees will be waiting for the official announcement on what the 8th Pay Commission recommends in this regard.