Can RBS sell its branches?
The Reserve Bank’s decision on sale of branch licences could be the decisive factor in RBS’ India sale. Sources in the Reserve Bank say it does not allow sale of branches to other banks, but history shows that the central bank could make exceptions to this rule. CNBC-TV18’s Latha Venkatesh and Gopika Gopakumar delve deeper.
The trump card to the sale of RBS’ India operations lies with the Reserve Bank. RBS plans to sell its retail and small and medium business operations in India and bankers’ guess the business may be worth Rs 8,000 crore.
RBS currently operates 31 branches of ABN Amro in India. The bank plans to sell most of these branches and retain only a few to continue its global markets and M&A advisory businesses.
But can RBS sell any of its Indian branches?
Top RBI sources say no banks are allowed to sell a branch licence to another bank. For instance in 2006, when the Bank of Bahrain & Kuwait wanted to exit India, it sought to sell its two branches to Standard Chartered. The Reserve Bank did not permit that sale. Instead it allowed only the sale of Bank of Bahrain & Kuwait’s assets.
But the Reserve Bank has made exceptions to this rule. In 2000 when Standard Chartered made a global acquistion of ANZ Grindlays for USD 1.34 billion, the regulator transferred all of Grindlays’ 56 branches to StanChart. Likewise when StanChart acquired American Express Bank in 2007, it got Amex’s branches.
So, is RBS India sale going to be any different?
Bankers say if RBS manages to get a global buyer for its operations, RBI may not be too rigid about the Indian operations. The regulator usually ensures that customers are not inconvenienced and may hence allow the sale of some branches. In that case, RBS can make several times the money it will make, if it were only allowed to sell the assets. But like we said, the trump card is with RBI