Saraswat Co-operative Bank Ltd (SCBL) on Tuesday said it will merge the beleaguered New India Co-operative Bank Ltd (NICBL) with itself, much to the cheer of depositors as the Reserve Bank of India had imposed business restrictions on the scam-hit bank.

The depositors of fraud-hit NICB, in excess of 1.22 lakh, will not have to take any haircut and all their savings will be protected, Saraswat Bank's chairman Gautam Thakur told reporters. 

The NICB depositors, who could not withdraw beyond Rs 25,000 per account, will be able to access the full amount once the merger gets effective, Thakur said, adding that he expects the merger to complete by end-September.

"We have voluntarily approached the RBI for the merger of Saraswat with NICB," Thakur said.

The shareholders of both the banks will have to clear a scheme of amalgamation.

Shareholders of NICB will be given shares in Saraswat Bank in a predetermined ratio, Thakur said.

After the shareholder nod, both banks will go to the RBI for clearance, and the central bank will announce an effective date for the merger, he explained, stressing that he does not foresee any difficulties in getting the clearances.

NICB, hit by an alleged Rs 122 crore embezzlement of funds by top management, has been under a RBI-appointed administrator since February. It had over Rs 1,100 crore of assets as of March 2025.

Not every loan disbursed by NICB is a non-performing asset (NPA), Thakur said. He was confident that Saraswat, with an asset size of over Rs 36,000 crore, will be able to absorb the impact of the merger.

Saraswat's gross NPA ratio, which stood at 2.25% in end-March, will move up by a few basis points but will come down eventually, he said.

It will take 18-24 months to turn around NICB, he said, adding that the bank will absorb the 200 remaining NICB employees, after 90 staffers resigned following the scam..

Saraswat will be evaluating all the employees of NICB before absorbing them, and will not take any of the tainted employees or those associated with them.

NICB has 27 branches, including 17 in Mumbai, Thakur said, adding that there are a lot of synergies between the two lenders from the urban co-operative bank space.

Saraswat Bank has 120 branches in Mumbai, including those 30 which have come from banks merged in the past, Thakur said.

Thakur said the bank is not interested in turning into a commercial lender, and is keen to continue working as a cooperative bank.

It may consider turning itself into a universal bank whenever the statutes permit, he said.

NICBL posted a negative net worth of Rs 102.74 crore for FY25. It reported a total business of Rs 3,560.52 crore, including deposits of Rs 2,397.85 crore and advances of Rs 1,162.67 crore. 

Saraswat Bank posted a total business of Rs 91,814 crore as on 31 March 2025, including deposits of Rs 55,481 crore and advances of Rs 36,333 crore. The bank’s net profit stood at Rs 518.25 crore in FY25, with gross NPAs at 2.25% and net NPAs at zero for the third consecutive year. The capital to risk-weighted assets ratio (CRAR) of the bank stands at 17.43%

Saraswat Bank has merged seven financially weak co-operative banks with itself in the past few years, rescuing over 800,000 depositors. The country's largest urban co-operative bank has helped troubled depositors without any haircut, ensuring full protection of interest of depositors, Thakur said.

Post-acquisitions, the combined business of these seven financially weak banks has grown from Rs 1,900 crore to Rs 9,200 crore in five years.