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Our Bureau

New Delhi , April 18

The Union Cabinet on Tuesday approved netting off of United Bank of India's (UBI) accumulated losses amounting to Rs 278.44 crore against the capital of Rs 1,810.87 crore with effect from March 31.

Briefing newspersons on the Cabinet decision, Mr Kapil Sibal, Minister of Science and Technology, said that the proposal does not involve any financial outgo since it was only a technical write-off.

This decision is expected to enable the bank to strengthen its balance sheet, facilitate adoption of Basle-II, create investment fluctuation reserve as per RBI guidelines, meet the future capital requirements through initial public offering, facilitate linkages with foreign banks, instil confidence among investors for investing in the bank's share and future expansion. The Union Cabinet also gave its approval for a proposal to return equity share capital of around Rs 700 crore by United Bank to the Government. Besides these two decisions, the Cabinet also gave its nod for converting a portion of the remaining equity share capital of around Rs 832.43 crore of the United Bank of India into preference share capital. The exact amount of the portion to be converted would be decided in consultation with the bank and RBI.

The Government has in the past permitted 13 banks — Punjab National Bank, Bank of India, Dena Bank, Allahabad Bank, IOB, Canara Bank, Andhra Bank, Bank of Maharashtra, Punjab and Sind Bank, Syndicate Bank, Vijaya Bank, Central Bank of India, UCO bank — to write off their accumulated losses against capital, when these banks were fully owned by the Government.

More Stories on : Financial Policy | Public Sector Banks

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