ICICI Bank says that Rs 175 crore has been provided for compound interest refund

Private lender, ICICI Bank, said on April 24 that it had provided Rs 175 crore to the borrowers to refund the interest amount at the interest rate. Management told reporters during a conference that after the results were announced.

The bank’s net interest income (NII), the difference between accrued interest and interest, increased 16.9 per cent to Rs 10,431.13 crore in Q4FY21, compared to Rs 8,926.9 crore in Q4FY20.
As per RBI (Reserve Bank of India) notification on 7 April 2021, the bank is required to refund / adjust the ‘Interest on Interest’ to the borrowers. As required by the RBI notification, the method of calculating such interest on interest has recently been circulated by the Indian Banks’ Association, the bank said.

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The bank is in the process of implementing this method suitably. On March 31, 2021, the bank created an obligation for estimated interest relief and reduced the same from interest income, the bank reported, announcing Q4 results.

On 7 April, the RBI issued a circular that mandated all lending institutions to immediately implement a board-approved policy to refund / adjust the ‘interest on interest’ taken from borrowers during the moratorium period. Was given, that is, on March 1, 2020, in line with the Supreme Court’s decision on August 31, 2020.
The Supreme Court ruled on 23 March that banks would have to waive compound interest to all borrowers during the moratorium period. RBI announced a six-month moratorium for all term loans last year to help the stressed borrowers who suffered during the period of COVID-19 lockdown.

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The RBI stated in the circular that the methodology should be finalized by the IBA to ensure that the above decision is implemented equally by all lending institutions in letter and spirit.
For the banking industry, according to some private estimates, the total cost of compounding interest waiver is around Rs 15,000 crore. But banks have already paid it for the borrowers with less than Rs 2 crore loan. Therefore, the remaining burden will not be very large. It is estimated to be between Rs 7,500 crore and Rs 8,000 crore. This figure may change after the final assessment.
For the quarter ended March 31, 2021, it saw a 260.5 percent year-on-year (YoY) increase in standalone profit of Rs 4,402.61 crore. The profit in the same period last year was Rs 1,221.4 crore.

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Non-interest income (other income) saw a decline of 3.4 percent year-on-year to Rs 4,111.35 crore for the March quarter, while pre-provision operating profit (PPoP) increased 15.6 percent to Rs 8,539.83 crore compared to Q4FY21. Same period.

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