U.K. Bank RBS 'Closing Indian Banking Operations' – Report

Finance and Trade

Royal Bank of Scotland is to close its banking operations in India in a bid to cut its losses after giving up on efforts to find a buyer due to fears about a lengthy regulatory approval process for a deal, the Financial Times reported. The article did not mention the effect on India's diamond industry as a result of the closedown. The bank has been steadily selling off non-core units of its Indian business in recent years, as part of a policy of withdrawal from the ill-fated global expansion that led to its bail out during the 2008 financial crisis.

RBS began seeking buyers for the remainder of its India operation business in 2015 and there was initial interest from local bank IDFC and Singapore’s DBS, according to informed sources. However, worries about a lengthy approval process that is further complicated by strict Indian regulations on the acquisition of banking businesses led RBS to conclude it would be better to close the operations and avoid the risk of mounting costs. “You are in limbo,” explained one senior executive with knowledge of the matter, with reference to RBS’s position. “Every day, the value is eroding until it becomes cheaper just to close down the operation.” Most operations at its Indian business — which provides financial services to institutional and corporate clients, as well as some retail banking, through 10 branches — will be wound up by the end of 2016. This will lead to the loss of about 700 jobs, although RBS will retain about 13,000 employees in India in back-office functions supporting other global operations.

Sources said that RBS’s failure to sell the Indian operations was due to regulatory holdups at a time when the government is following an aggressive policy of bank reforms, including the consolidation of its public sector banks, according to the FT. RBS acquired the Indian business via its 2007 purchase of ABN Amro Bank which was one of the largest foreign banks operating in India at that time. After the 2008 financial crisis, RBS aimed to focus on its core strengths in institutional and corporate banking, and agreed to sell its banking operations in six Asian countries to Australia’s ANZ in 2009. But Indian assets were excluded from that deal because of concerns about regulatory approval, according to a source. RBS agreed to sell its Indian retail business to HSBC in 2010, only for the deal to be complicated by the Reserve Bank of India’s refusal to transfer the licenses for the 31 branches involved. Although the RBI later reversed that decision, regulatory approval had not been granted by the time the deadline for completion expired in November 2012.