LONDON Royal Bank of Scotland's (RBS.L) sale of its Indian retail and commercial banking operations to HSBC (HSBA.L) has fallen through more than two years after it was struck, leaving RBS to wind it down.
RBS agreed to sell the business to HSBC in July 2010. It has 31 branches, 400,000 customers and was profitable, with assets of 190 million pounds ($305 million) and revenues of 42 million pounds in the first nine months of this year.
The collapse is further evidence of the difficulties of completing banking deals amid changing strategies, stricter regulation and complex IT issues. RBS's $2.7 billion sale of 316 branches to Santander (SAN.MC) also fell apart last month after more than two years of talks, which the Spanish bank blamed on IT issues.
RBS and HSBC declined to specify the reasons for the breakdown, other than a failure to complete all the details by Friday, the so-called long stop date by which issues such as data and customer transfers and regulatory approvals should be resolved.
India's regulator has strict rules on branch ownership by foreign banks and that had caused complications with the deal, local reports have previously said.
HSBC was due to pay a premium of up to $95 million over the tangible net asset value (TNAV) of the businesses, although the price could have been reduced if bad debts rose or there were other changes, and the deal could have ended up costing RBS.
The business had shrunk significantly in the last two years - it had 1.1 million customers in March 2010.
RBS, 82 percent owned by the UK government, said on Friday: "Consistent with RBS's strategic objective to reduce or exit its non-core assets and businesses, it will begin to wind down its retail and commercial banking business in India, whilst meeting all customer obligations."
HSBC said it "remains committed to pursuing growth in India" through its existing operations, saying it is a key strategic market.
HSBC Chief Executive Stuart Gulliver has been streamlining the bank and pulling back from some markets since taking over at the start of 2011, in an effort to cut costs.
(Reporting by Steve Slater; Editing by Hans-Juergen Peters)