LONDON: Royal Bank of Scotland is set to announce on Friday that it will set aside a further 125 million pound ($202.55 million) to cover compensation for mis-selling loan insurance, a person familiar with the matter said.

The British bank is expected to bring its provision for the ethically questionable practice of misleading investors about loan insurance to more than 1 billion pounds when it publishes its first-quarter results.

The expected announcement will take the bill for state-owned banks resulting from the payment protection insurance (PPI) scandal to almost 5 billion pounds.

PPI policies were typically taken out alongside a personal loan or mortgage to cover repayments if customers fell ill or lost jobs.

They were often sold, however, to self-employed or unemployed people who would not have been able to claim.

Rival British banks Lloyds and Barclays recently bolstered their compensation funds following a spike in the number of people making claims.