RBI To Give Conditional Approval To HSBC For RBS Assets

The Reserve Bank of India (RBI) will give conditional approval to HSBC's proposed acquisition of select assets of Royal Bank of Scotland NV (RBS). The regulator will, in all likelihood, approve a portfolio sale, but is against an automatic transfer of RBS's branch offices in India to HSBC. HSBC would have to apply for new branch licences.

In 2010, HSBC had agreed to buy the commercial and retail businesses of the erstwhile ABN Amro in India that RBS received as part of its share in a three-way split of the Dutch bank whose other business were acquired by Fortis of Belgium and Santander of Spain.

"The RBI supervisory board discussed the details of the transactions and evaluated the regulatory aspects of the deal at its Jaipur meeting in October," said a source in the know of the development. An email query to the RBI went unanswered.

Recently, the senior management of the two banks had met RBI officials to resolve issues relating to the deal that has been pending for two years, as the regulator is reluctant to allow an automatic transfer of RBS's branches. Currently, the RBI, in line with the World Trade Organisation guidelines, gives 12 branch licences annually to foreign banks.

"The uncertainty seems to have cleared. We expect the deal to go through, but with certain riders. This could lead to renegotiation on the pricing," said an investment banker familiar with the development. In July 2010, HSBC had announced that it would acquire select assets of RBS for a premium of $95 million over the net asset value of the business, which could change due to possible loan defaults.

"RBS, which had acquired 31 branches in the country when it bought out the ABN Amro Bank NV's Asian operations in 2007, had decided to retain five branches and surrender the remaining to the RBI," the banker said. "Following this, HSBC would have to apply for fresh licences. They could be granted branch licences in locations like Moradabad and Panipat, where HSBC does not have a presence."

"We continue to work closely with HSBC and the regulators to complete the deal in a manner that satisfies regulatory requirements and is in the best interests of our clients and employees," an RBS spokesperson said. In a recent interview to ET, HSBC India CEO Stuart A Davis said: "When we first looked at the business, we thought this acquisition would give us distribution and customers, and bring in one to two years of growth. We have made an application to RBI on a certain basis and the central bank has given us indications on what we can expect. Certainly, our discussion with the RBI was such that we thought what we got would be satisfactory to us."

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