Protecting loan guarantors: Kerala invokes service rules to withhold pension 

THIRUVANANTHAPURAM: The Kerala government has decided to crack down on a practice in which government employees obtain large loans using colleagues as guarantors, fail to repay them, retire, and continue drawing pensions while the guarantors are left to bear the recovery burden.

The decision follows a complaint submitted to the Chief Minister against a former Additional Secretary in the Finance Department. Since existing rules do not permit recovery of such dues directly from pension, the Chief Minister directed that the officer's pension be withheld. The Service Disciplinary Committee subsequently issued an order withholding the pension.

The former official had borrowed ₹60 lakh from the Secretariat Employees' Co-operative Society, using the salary certificates of three Joint Secretaries as security. The loan, taken in 2017, remained unpaid until the officer retired in 2022.

Following the default, the co-operative society initiated recovery proceedings against the guarantors by proposing deductions from their salaries. Although they lodged complaints, they were informed that the government had no legal authority to recover the dues from the retired officer's pension. Existing retirement procedures also do not include bank or co-operative society loans in the liability-free certificate required at retirement, leaving no provision to recover such amounts from gratuity.

The guarantors then approached the Chief Minister and the Chief Secretary. After an inquiry confirmed the allegations, the government sought an explanation from the retired officer. However, he was unwilling to repay the loan.
The Chief Minister then ordered that the pension be withheld, a decision that was approved by the Kerala Public Service Commission (PSC). The government has stated that the pension, along with applicable interest, will be released once the outstanding loan liability is cleared.

According to the government, the action is based on Rule 2A of the Kerala Government Servants' Conduct Rules, which requires government employees to maintain good conduct during service. Since pension is a lifelong benefit linked to satisfactory service conduct, employees who deliberately default on loans and leave guarantors to face recovery proceedings can be treated as having violated the rule.

The Service Disciplinary Committee has held that such conduct amounts to misconduct under the service rules. Officials said this is the first such instance in the state service where a pension has been withheld on these grounds.