Kotak Mahindra Bank Ltd , India's fifth-biggest lender by market capitalisation, reported on Monday a 23 percent rise in third-quarter net profit, helped by higherinterest income and a write-back of provisions made for mark-to-market losses.

Net profit at the private sector bank came in at 12.91 billion rupees ($181.20 million) for the three months to Dec. 31, compared to 10.53 billion rupees a year earlier and roughly in line with analysts' average estimates of a profit of 12.71 billion rupees, according to I/B/E/S data from Refinitiv.

While provisions for bad loans climbed over 50 percent to 2.55 billion rupees in the quarter, the bank got a write-back in the amount of 2.72 billion rupees for mark-to-market losses.

Asset quality improved, with gross bad loans as a percentage of total loans standing at 2.07 percent at the end of December. That compared with 2.15 percent in the previous quarter and 2.31 percent a year earlier.

Interest earned rose nearly 25 percent to 62.50 billion rupees in the quarter, while net interest margin - the difference between interest paid and earned and a key measure ofprofitability - came in at 4.33 percent, compared to 4.27 percent in the year-ago quarter.

The strong results came despite the lender being involved in a tussle with the Reserve Bank of India (RBI) over Chief Executive Uday Kotak's stake in the bank.

The RBI has asked CEO Kotak, India's richest banker, to cut his 29.73 percent stake as at Sept. 30 to meet shareholding norms for private sector banks and ruled an issue of preference shares by the bank towards that goal did not meet its requirements. The bank has challenged RBI's decision in court.

($1 = 71.2490 rupees)

(Reporting by Chris Thomas in BENGALURU; Editing by Christopher Cushing and Muralikumar Anantharaman)

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