New Delhi, April 9 -- 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, two people aware of the matter said.

The government has agreed to make good compound interest refunds of loans up to Rs.2 crore during the 1 March-31 August 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 Indian Banks' Association has taken up the matter with the government," the head of a public sector bank, one of the two people cited above said.

"Banks have no choice but to refund the borrower...