Saraswat Bank to Merge with New India Co-operative Bank: RBI Nod Awaited, No Loss to Depositors Assured

Saraswat Co-operative Bank has formally announced its intention to merge with New India Co-operative Bank in a strategic move aimed at protecting depositors' interests and restoring stability to New India's financial position. The merger proposal is currently pending necessary approvals from both the Reserve Bank of India (RBI) and the shareholders of the respective banks.

Background: Fraud and RBI Intervention

Earlier in the year, New India Co-operative Bank was rocked by a significant fraud case amounting to Rs 122 crore. In response, the Reserve Bank of India imposed regulatory restrictions on the bank in February and appointed an administrator to oversee its operations.

The appointed administrator, Shreekant, recently reported positive developments, noting that the bank's collection efficiency has doubled in recent months. He added that the bank's loan portfolio is primarily focused on the retail segment, which could support recovery efforts.

Merger Timeline and Financial Impact

According to Gautam Thakur, Chairman of Saraswat Bank, the merger is expected to be finalised between August and September this year. Thakur expressed confidence that the combined entity will undergo a successful turnaround within one to two years following the merger.

He projected that Saraswat Bank's balance sheet will cross Rs 1 lakh crore in the current financial year, marking a significant milestone in its growth trajectory.

As part of the merger, select assets and liabilities of New India Co-operative Bank will be transferred to Saraswat Bank. While this transition may temporarily impact asset quality and capital adequacy ratios, Thakur remains optimistic about the long-term benefits. He believes the strategic move will enhance the strength, reach, and sustainability of the merged organisation.

Saraswat Bank has a proven track record of supporting distressed co-operative banks, having successfully merged seven such institutions in the past, without any depositor experiencing losses.

"We have merged seven such banks with ourselves in the past, helping over eight lakh depositors without any haircut," said Thakur, underscoring the bank's strong commitment to depositor protection.

As part of the merger process, Saraswat Bank plans to issue new shares, although strict measures will be taken to ensure that no shares are allocated to individuals involved in the fraud or financial misconduct. A comprehensive audit will also be conducted to maintain full transparency and accountability throughout the process.

Strategic Expansion and Branch Network Growth

Looking ahead, Saraswat Bank plans to expand its branch network significantly, aiming to open 40 to 45 new branches, including 27 branches from New India Co-operative Bank. The bank also intends to expand its geographical presence, with states like Rajasthan under consideration for future operations. These efforts are part of a broader growth strategy to strengthen the bank's footprint in the urban co-operative banking space.

Despite its expansion plans, Saraswat Bank has made it clear that it has no intention of converting into a universal bank. "We aim to remain a shining example in the urban co-operative banking sector," Thakur emphasised, reaffirming the bank's dedication to its founding principles.

Saraswat Bank Financial Performance

As of 31 March 2025, Saraswat Bank reported a strong and stable financial performance, reflecting its consistent growth and prudent management practices. The bank's total deposits stood at Rs 55,481 crore, showcasing continued trust from customers and depositors. Meanwhile, its advances reached Rs 36,333 crore, indicating a healthy lending portfolio.

For the financial year, the bank posted a net profit of Rs 518.25 crore, underscoring its profitability and operational efficiency.

In terms of asset quality, Saraswat Bank maintained a gross Non-Performing Assets (NPA) ratio of 2.25%, while its net NPAs remained at zero for the third year in a row. This consistent performance highlights the bank's strong credit monitoring and effective risk management systems.

Furthermore, the bank's Capital-to-Risk Weighted Assets Ratio (CRAR) was reported at a robust 17.43%, reflecting solid capital adequacy and providing a substantial buffer to absorb potential financial stress.