Indian Bank to get nod for Rs 3830 cr write-off

The finance ministry is set to approve a scheme for writing off Indian Bank's accumulated losses of Rs 3,830 crore against its paid-up capital of Rs 4,594 crore.

"Once we get the intimation on the restructuring from the government, we can plan for an IPO during the next financial year. We would consider issuing 50 million shares with a face value of Rs 10 each," said K C Chakrabarty, chairman and managing director of Indian Bank.

By adjusting accumulated losses against its capital, the bank would have a cleaner balance sheet and leaner capital base. The bank would consider converting some of its equity capital into preference shares to further reduce its equity to get a better price for its IPO.

"We have a capital adequacy ratio of 14 per cent and our capital requirement is only to meet credit growth. The IPO would be small as we would like to test the market and then aim at a larger public issue three years down the line," Chakrabarty said.

The bank has been profitable for the last three years but after providing for statutory appropriations it is left with nothing to reduce accumulated losses.

The bank earned a net profit of Rs 408 crore last year, which had to be put into statutory, capital and investment fluctuation reserves.

The issue had been pending with the finance ministry for the last few years. the move may require an approval from the cabinet committee on economic affairs.

Indian Bank, Central Bank of India and United Bank of India are the only three banks where the government holds 100 per cent equity, the other 16 nationalised banks are listed.