The attempt of Royal Bank of Scotland to sell the Indian assets of ABN Amro Bank NV for $500 million, has run into a trouble after the Reserve Bank of India (RBI) has turned down to transfer its branch licenses to a prospective buyer, reported Livemint.
The Dutch banking major is selling non-core businesses in select markets to generate funds. In India, it currently has 31 branches and approximately 10,000 employees because of the acquisition of the Asian operations of ABN Amro in 2007. This February, the bank had declared its intension of selling non-core divisions like retail and commercial banking operations in India.
The Indian branch network is crucial for the valuation of RBS assets, as it is very difficult for overseas banks to obtain branch licenses in India. Under WTO norms, RBI is allowed to grant 12 branch licenses annually to overseas banks, but it typically issues about 14 every year. However, overseas banks have been asking for more.
RBI has taken the decision on the fact that the proposed sale is not a bank buyout. Transfer of branch licenses has been permitted in India only in the case of a bank buyout. For instance, Standard Chartered bought American Express Bank from American Express, for $823 million in 2008. Since it was a global acquisition, the seven branch licenses in India were transferred to Standard Chartered.
