The Union finance ministry has decided to write off Uco Bank's accumulated losses of Rs 1,760 crore against the government's contribution to the bank's paid-up capital.
The move is aimed at cleaning up the bank's balance sheet before launching an initial public offer (IPO), expected during the next financial year. The bank has turned the corner after it was classified as a weak bank and from the current fiscal it is no longer in this category.
Uco Bank's entire paid-up capital of Rs 2,264 crore has been contributed by the government.
Finance ministry officials said that the move was necessary as it would help the bank realise better value for its shares. Uco Bank had approached the government with the proposal to write off the accumulated losses earlier this year.
Officials said that a formal communication on the issue would be sent to the bank over the next few days.
They said that apart from Uco Bank, Union Bank of India's proposal to come out with an IPO has also been cleared and a request from the central bank has also been received. They said that the other public sector have not come forward with IPO proposals.
Over half-a-dozen other public sector banks such as Canara Bank, United Bank of India, Punjab & Sind Bank and Bank of Maharashtra have planned IPOs over the next few months.
The finance ministry's approval for coming out with an IPO is required as the shareholding pattern undergoes a change as does the composition of the board of directors. The response to the IPO by Punjab National Bank has buoyed the sentiment in the banking industry.
