5 pc hike in DA for govt employees

The Cabinet on Thursday passed a series a proposal that brings good news for government employees, loan seekers and farmers. HT Correspondent reports.

The Cabinet on Thursday passed a series a proposal that brings good news for government employees, loan seekers and farmers.

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The Cabinet has cleared a five per cent hike in dearness allowance for central government employees and pensioners with effect from July 2009. This will hit the exchequer by over Rs 2,900 crore this fiscal and Rs 4,355 crore in a full year.

Aimed at promoting low cost housing, a one per cent subsidy for home loan borrowers up to a maximum of Rs 10 lakh was also passed.

The scheme would result in saving of up to Rs 10,000 on monthly repayments for a year. But it’s applicable only on fresh loans and not on the existing ones.

The threshold limit also restricts the utility of the scheme to tier II and III cities and not in big cities like Delhi and Bombay, where it is perceived to be too small.

“It is expected that cut in interest rates should reduce Equated Monthly Installments (EMIs) of borrowers and create additional demand for housing, particularly in the low cost category”, said Ambika Soni, minister of information and broadcasting. The scheme would benefit about 10 lakh borrowers.

The government, however, decided to reduce the interest subsidy on such loans to banks to two per cent from three per cent provided earlier.