Indian banks may take a Rs. 7,000 crore hit

Compound interest refunds for loans above Rs. 2 crore during last year’s moratorium will cost Indian lenders over Rs. 7,000 crore this quarter, given the government’s unwillingness to compensate them for it.

The government has agreed to make good compound interest refunds of loans up to Rs. 2 crore during the March 1 -August 31 moratorium and has already credited Rs. 6,500 crore to banks in this respect. However, it has made no commitment about the rest, forcing bankers to take the hit.

The head of a public sector bank said, “The Indian Banks’ Association has taken up the matter with the government.”

“Banks have no choice but to refund the borrowers. Each bank will have to take a hit of anywhere between ₹300-400 crore. We cannot challenge this (Supreme Court) order also. All other parts of the order are good. We don’t want to reopen this order. Maybe a one-time hit is okay,” the banker stated on condition of anonymity.