RBS had committed to HSBC towards the sale of all its 31 branches and 100 retail / wealth staff to HSBC. It is yet questionable if HSBC could have absorbed all 1800 staff which continues to operate as ABN AMRO in the country since License transfers are a throny issue that from the point of view of the regulator should not have risena s the occasion to sel lin each case s in question. 

Since the deal signing in 2009/2010 when ANZ lost to the HSBC bid in India and Malaysia, here has been speculation peculiar to the Indian regulator's national requirements. None of th speculated objections have yet been resolvedm ,,aditionally with RBS and ABN planning to come back to the country RBI has taken a harder stance on this apparent tomfoolery with buying and selling branches and networks . Among the first nonsensical results of imediate interest to RBI woul dhave been the multiplicity of licences for the acquiring bank and the lack of branch approvals for HSBC once it as acquiring bank had surrendered the second licence per law with RBS. Even befor ethe non event though RBI has now found itself troubled by the fact theat RBS wll continue to live in the country in isolation as also ANZ ( in its TV appearance by CEO Mike Smith on Bankers' Trust - B-UTV) plans to remain only in institutional business in India. ANZ, ICBC have one branch each in the new avatar, the most planned by RBS in its new role as a exclusively wholesal player in the country. 

Media reports make it clear that RBI has made a unitary objection on the sale - that of the 32% priority lending commitment which precludes any option without retail branches and in factas the new charter sugggests, new branches in Tier 5 and 6 town. 

Priority sector requirements are not new and all the 32 license holders in the country manage the same lending requirement without their own branches in the rural hinterland. Obviously those wholesale approaches are not the objective of the Priority sector lenbdiong regulation. 

Other thorny issues still remaining to be sorted out thus he picure that emerges is the following :

 

1. Each branch still requires explicit RBI approval and none of the 32 players have been forthcoming in unitarily capitalising the India subsidiary for its leverage commitments as currently we all go by Internal Risk management approaches that count on a single Asia Pacific Balance sheet to selll loans to India corporates esp as the competitive advantae for us in Foreign banks is in arranging cheaper ECB loans and FC denominated swaps

2. Licenses being onditional to Priority sector lending apart , there needs to be dialogue between banks and the local regulator with the Indian operation commiting that it has the authority and the reach to complete all its India commitments and RBI observations. For example Swaps create unseemly leverage and banks do not resolve the same as per tehir own internal risk management where approvakls are already received?

3. Banks may feel stretched by the current requiremetns to commit 12 new breanches in a year as are automatically approved with the 32 foreign banks surviving on 320 branches for their nearly double digit share in Indian banking assets a\nd having avoided the changeover to WOS formats suggested in 2005 with INR 3 bln capital minimum . That this capital would hgave to satisfy basel and RBI norms on CAR locally queers the pitch for effective pricing for these banks and also in terms of global business sructures where entire regions operate on economics of large volumes that they will have to indeopendently build in India. 

4. The banks do remain commited to growing in India, HSBC for example and till recently Citi heavily recruiting in the country in retail and wholesale. Banks remain the preferred stock recriter of MBAs led by Foreign banks in India

5. A roadmap for ringfencing national operations has not been committed by BCBS ( Basel Committee) and banks have already calendarised ramp up of Capital per new standards till as late as 2018 and 2019 in view of the adverse strains on their global operations

 

 

 

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