Banks will need to refund Rs 4,500 cr compound interest to borrowers

Banks will need to refund estimated Rs 4,500 crore to borrowers for compound interest charged on loans greater than Rs 2 crore. This follows Reserve Bank of India’s directive to banks to refund compound interest levied during six-months moratorium, according to Kotak Institutional Equities.

Banking regulator gave advise to banks to implement Supreme Court order on giving the compound interest relief to loans above Rs 2 crore and lifting of standstill on classifying account as non-performing loan.

The estimated impact is assessed for 4QFY21E earnings with a broad-brush assumption of corporate and SME loans as the qualifying amount (above Rs