Indian Bank, UBI get breather

The government will write off accumulated losses of Rs 4,109 crore of state-owned Indian Bank and United Bank of India. The write-off proposal is part of the supplementary demand for grants tabled in Parliament on Monday.

Chennai-based Indian Bank's accumulated loss of Rs 3,830 crore will be written off against its equity capital of Rs 4,574 crore and Kolkata-based United Bank of India's accumulated loss of Rs 278 crore against the bank's capital of Rs 1,811 crore.

The proposal does not entail any cash outgo for the government, as it is only a technical write-off. The Cabinet had approved the write-offs in April.

The Cabinet approval also included converting a portion of the remaining equity capital of the two banks into preference shares.

United Bank will also return equity capital of around Rs 700 crore to the government.

The government has, in the past, allowed 13 nationalised banks to write off their accumulated losses against the capital.

Another 100 per cent government-owned bank, Central Bank of India, has also sought capital restructuring, but is yet get final approval. Indian Bank reported a 20.6 per cent rise in net profit in the first quarter of 2006-07 to Rs 164.8 crore from Rs 136.5 crore a year earlier.

The growth in loans portfolio in the first quarter was 26.5 per cent to Rs 24,651 crore at the end of June 2006 from Rs 19,487 crore a year earlier.

United Bank's net profit in the first quarter of 2006-07 was up 10.79 per cent year-on-year to Rs 70.35 crore. Its gross non performing asset (NPAs) have fallen to 4.64 per cent at the end of June 2006 from 5.82 per cent a year earlier, whereas its net NPA were 1.92 per cent from 2.32 per cent a year earlier.