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Wednesday, April 19, 2006

Writing off UBI's losses pave way for an IPO

Paving the way for a possible initial public offering, IPO, the Cabinet has approved write-off of accumulated losses of United Bank of India, thereby cleaning its balance sheet, reports agencies.

"The Cabinet approved write-off of accumulated losses of United Bank of India amounting to Rs 278.44 crore (Rs 2.78 billion) against the capital of Rs 1810.87 crore (Rs 18.10 billion) with effect from March 31, 2006," Science and Technology Minister Kapil Sibal told.

The bank would return equity share capital of around Rs 700 crore (Rs 7 billion) to the government and convert a portion of the remaining equity share capital of around Rs 832.43 crore (Rs 8.32 billion) into preference share.

"The exact amount of the portion to be converted will be decided in consultation with the bank and Reserve Bank of India," he said.

The Cabinet decision for writing off accumulated losses would strengthen the balance sheet of United Bank of India and facilitate adoption of Basel-II norms.

The decision would help create investment fluctuation reserve, IFR, as per RBI guidelines and assist the bank in meeting future capital requirements through IPO, the Minister said.

It would also facilitate linkages with foreign banks, instill confidence among investors for investing in bank's share and help in future expansion.

"The proposal does not involve any financial outgo since it is only a technical write off," he said.

Government had in the past permitted 13 banks to write off their accumulated losses against capital.

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