Indian Bank's Rs 3,830 crore written off

The Cabinet today cleared Indian Bank's proposal for writing off Rs 3,830.14 crore against its equity capital of Rs 4,573.96 crore along with conversion of a portion of the remaining equity into preference shares of Rs 743.82.

This is expected to help the bank clean up its balance sheet and go for an initial public offer (IPO) sometime in 2006-07.

The conversion of equity capital into preference capital will reduce its equity base and help it get a better price for the IPO.

"The IPO would be small as we would like to test the market and then aim for a larger public issue three years down the line," a senior Indian Bank executive said.

The bank has been earning profits since 1991-02. Before Indian Bank, the government had permitted 13 banks to write off losses against capital, when these banks were fully owned by the government of India. The proposal does not involve any financial outgo since it is a technical write-off.