HDFC bank sets aside 500 crore for compound interest waiver

MUMBAI : India’s largest private lender HDFC Bank announced on Saturday it had set aside ??500 crore as provisions to cover the compound interest repayment ordered by the Supreme Court to all borrowers during the period March-August.

Srinivasan Vaidyanathan, the bank’s chief financial officer, told analysts that although the Association of Indian Banks (IBA) is still working on the methodology for calculating the repayment, the bank has set aside ??500 crore of provisions.

Mint had reported that although banking industry lobbying body IBA has asked the government to reimburse the compound interest exemption, the government is not too keen. It is estimated that the waiver bill would be in the range of ??7,000-7,500 crores. Of course, the government bore the cost of waiving ??6,500 crore for borrowers up to ??2 crore in some sectors announced last October.

The government announced that loans to individuals and small businesses up to ??2 crore will benefit from the compound interest exemption during the moratorium period from March to August. The moratorium announced to help borrowers weather the covid crisis ended on August 31. However, last month the Supreme Court said that there was no reason in policy to limit the benefit of the waiver to only categories of loans up to ??2 crore and asked banks to waive compound interest during this period for all borrowers.

HDFC Bank on Saturday announced an 18.1% year-over-year (year-over-year) increase in net income for the three months from March to ??8,186.5 crores. However, his profit was less than ??8,436 crores estimated by a Bloomberg poll of 14 analysts.

Claiming that the economic impact of the second wave of covid-19 appeared to be less unfavorable than the first, the bank’s management said it had already completed another round of stress tests on its books.

“Based on the current situation, should a financial impact arise, we are currently in the process of finalizing various stress tests that we have already completed. I don’t want to publish these results just yet because they might be unnecessarily too conservative like we did last time around and we had to revise the stress test numbers, ”said Jimmy Tata, Credit Manager, HDFC Bank .

Tata added that the reason for HDFC Bank’s initial conservatism the last time, perhaps, was that it didn’t know what the government and the RBI were going to do.

“We would expect that if the medical condition turns into an economic condition, there will be similar levels of help from the government, then if you look at our portfolio and our client, we hope there will be no consequences. serious ourselves. ” he added.

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