Yes Bank, IndusInd Eye RBS’ Retail Assets Here

If the deal fructifies, it will mark the end of RBS' two-year ordeal in trying to sell its Indian assets

    Yes Bank and IndusInd Bank, lenders aspiring to imitate the most-valuable HDFC Bank's growth model, are negotiating to acquire the Indian retail assets of Royal Bank of Scotland (RBS), a deal that was abandoned by the Hong Kong and Shanghai Banking Corporation (HSBC) over branch network issue, said two persons with direct knowledge of the development. "A meeting with possible buyers concluded last week," said one of the persons who did not want to be identified. 
"Yes Bank and IndusInd Bank have shown interest," he added. There is no certainty that the transaction will be concluded. If it happens, it will end RBS' two-year ordeal in trying to sell its India assets after it managed to sell the rest of Asia business to Australia and New Zealand Bank. If IndusInd manages to get the assets, it may be chief executive Romesh Sobti buying part of a business that he helped create as the India head of ABN Amro. RBS got the Indian assets of ABN as part of a three-way split of the Dutch bank after it was acquired along with Santander of Spain and Fortis of Belgium. Yes Bank and IndusInd spokespersons declined to comment. RBS assets in India include a huge deposit base of . 13,039.5 crore and loan book of . 12,534.5 crore. Its net NPAs as on March 2012 stood at 0.74%. 
"For domestic players looking to acquire these assets, the need to accelerate growth and access new customer base in the home market at the right price will drive decision-making," said Joydeep Sengupta, managing partner, financial institution practice (Asia Pacific), at global consultant Mckinsey & Company. "Also, with transfer of branch licences becoming possible for domestic players, it sweetens the deal further." 
IndusInd, the bank founded by the Hinduja family, bought Deutsche Bank's credit card business in 2011. The bank became cash-rich after it raised . 2,000 crore in a share sale last month. "RBS, majority owned by the British government, will continue to wind down the retail and commercial businesses in India in an orderly way and is exploring options for this," an RBS spokesperson said. 
HSBC had to abandon the deal partly due to the Reserve Bank of India's reluctance to let the controversial British bank take over the branch network in full. But with Yes Bank and IndusInd, the 31 branches of RBS may not be of much consequence since they are nearly present in all the localities where RBS' branches are located and new branch licences are a lot more liberal. 
"RBS may look at stripping down assets and selling them or may scout for a buyer who can take over the business along with the branch presence," an investment banker with knowledge of the deal said. ''Branch network is a lesser issue.'' 
India represents a small part of RBS' global business, accounting for just 0.02% of group assets and about half a per cent of its non-core business that the bank is trying to sell. 
"Foreign banks in India have primarily catered to the affluent customer base, which the newer generation of banks like Yes Bank and IndusInd are trying to also attract. With the same service proposition, if such a transaction goes through, the acquirers will look at retaining the customer base and growing it. In all it sounds as a good fit," said Vaibhav Agrawal, banking analyst with Angel Broking. 
sneha.shah@timesgroup.com