THE Government was not following Executive Council guidelines on subsidising schools by offering interest-free loans to finance the purchase of school premises. Mr Jenney also criticised the Government's policy of indirectly subsidising profit-making schools in Hongkong. The policy, endorsed by the Legislative Council Finance Committee in July 1991, has resulted in interest-free loans to six schools totalling $206.5 million. Delia Memorial School (Yuet Wah) topped the other five schools with a government loan of $65 million, followed by its sister schools, Delia Memorial Boys' School at Mei Foo which borrowed $41.8 million and the Delia Memorial School (Mei Foo) which received $25.2 million. Other schools which benefited are Matteo Ricci College with $29 million, Pak Kau English School (Hongkong) with $21.5 million and Tak Yan School, which received $24 million. In its submission to the Finance Committee in 1991, the Government said no interest would be charged to these schools. It was in contrast to an Executive Council memorandum on September 20, 1989 which recommended ''as a special interim measure to take account of historic circumstances, private schools in the BPS (Bought Place Scheme) should, where necessary, be offered loans to enable them to acquire permanent premises. Interest would be charged at appropriate rate''. Mr Jenney said it had been ''unambiguously stated'' that interest should be charged to these schools and the Government should make a re-submission to Exco if it decided to alter the scheme. In response, government officials said any increase in the operation of the schools would be laid on the Government under the BPS. But the Government has agreed to seek covering approval from the Executive Council for the loans already given.