Government Increases Maximum Distress Loan for Public Servants to Rs. 400,000

In a significant relief measure for public sector employees, the Ministry of Public Administration, Provincial Councils, and Local Government has announced an increase in the maximum limit of the distress loan available to public servants. The amount has been raised from Rs. 250,000 to Rs. 400,000, effective from May 1, 2025.

This revision, issued under Public Administration Circular 12/2025 dated May 9, 2025, comes as a response to the increase in the minimum basic salary of public officers outlined in the 2025 Budget proposals. The move is expected to offer better financial support to government employees facing temporary financial hardship.

According to the new guidelines, the loan amount will be capped at either 10 months’ basic salary or Rs. 400,000, whichever is lower. The salary considered for the loan calculation will be based on the basic salary specified in Schedule II of Public Administration Circular 10/2025 issued on March 25, 2025.

In addition to setting the new loan limit, the circular also provides clarity on how the salary should be calculated for both loan eligibility and recovery. Institutions are required to establish a priority system to manage loan disbursements without exceeding the overall lending limits.