Saraswat to write off Maratha Bank losses in 5 yrs

Saraswat Bank is likely to write off around Rs 25 crore of Maratha Mandir Bank's losses over five years, S K Banerjee, managing director of Saraswat Bank said.

The merger of Maratha Mandir Bank with Saraswat Bank became operational from Monday, though the merger was formally announced on March 20.

"RBI (Reserve Bank of India) has allowed us to write off the losses in five years. I think we will do it that way instead of writing it off at a single go," Banerjee said.

"In the 2006-07 budget, the government said co-operative banks will have to pay income tax. So if we write it off in a single go, then our reserves will be almost nil, as we will have to pay an income tax of 33 per cent on the net profit," he said.

However, the bank's net profitability will not be impacted by absorption of the total loss, as Saraswat Bank has Rs 700 crore in reserves, he said.

Explaining the rationale behind merging the loss-making bank, Banerjee said, "RBI was not giving us license to open more branches, so we had to take the inorganic route."

Maratha Mandir had 11 branches and after the merger, Saraswat Bank will now have 86 branches in the country. Besides losses, Saraswat Bank has absorbed the non-performing assets of the bank, which were around 60 per cent.

It also absorbed 230 employees of the bank.