Merrill Lynch will move many of its IT contracts from struggling Indian software firm Satyam Computer Services to rival Tata Consultancy Services, according to Indian newspaper The Economic Times.

Satyam Computer Services his by $1 billion accounting fraud scandal

The Times said the investment bank informed Satyam of plans to switch the bulk of its contracts to Tata after sending a team in early February to assess the situation at the crisis-stricken Indian outsourcer.

The Merrill account contributed about $40 million (£27.58m) to yearly revenues at Satyam, the newspaper said, citing "software industry sources familiar with the matter".

The news is another blow to Satyam, which has been struggling for survival following revelations of a massive accounting fraud perpetrated by its founder Ramalinga Raju. It is India's biggest corporate scandal to date. Raju resigned after admitting that accounts had been overstated and about $1 billion in cash and bank balances were missing.

At time of writing, Merrill Lynch had not returned calls.

A Satyam spokesperson said in a statement: "We do not comment on customer specific contracts as a matter of practice."

"Over 90 per cent of our customers are continuing with Satyam and we continue to remain focused on delivering services as agreed with our customers."

Satyam’s government-appointed chairman Kiran Karnik told The Times: “IT companies win and lose contracts all the time. I do not know why the media has to report it all the time.”

Merrill Lynch was also a principal banking adviser to Satyam, but resigned in January, within hours of the revelations of the fraud, citing “material accounting irregularities” for its decision.

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