Mumbai / Delhi: Dutch lender ABN Amro Bank NV, a part of Royal Bank of Scotland NV, is winding down its personal loan and credit card business in India to focus on retail deposits, wealth management and corporate banking, according to bank officials.
Many employees engaged in selling retail loan products such as credit cards and personal loans are being asked to leave. At the beginning of the current fiscal, the consumer banking team at the bank, which has 31 branches in India, employed 2,850 people, but at least 500 of them have left so far.
“The book size of the consumer finance division has almost been halved—from Rs2,300 crore to Rs1,200 crore. The plan is to shrink it to around Rs190 crore,” said an executive at ABN Amro Bank who did not want to be identified as he is not authorized to speak to the media.
The Indian operations, which were sold to Royal Bank of Scotland in 2007 as part of a global acquisition, posted a 93% slide in profit to Rs19.39 crore in the year ended 31 March, 2009, from Rs280.99 crore in the previous fiscal.
RBS is selling businesses designated as non-core in select markets to raise funds even though it will continue and expand the corporate and wholesale banking activities of ABN Amro.
“As part of our regular review of the products and services we provide, in line with many other banks in India, we made a decision earlier this year to discontinue the issuance of fresh credit card or unsecured loans,” an RBS spokesperson said in an email response to queries from Mint.
“We continue to maintain our service for existing card and loan customers and remain focused on the branch banking and wealth management businesses in the retail arm of the bank.’’
In February 2009, RBS declared that it would move its India retail and commercial banking operations, which employ 2,500 people, into a for-sale, non-core division. Morgan Stanley is advising RBS on the sale.
There has been speculation that a prospective sale to HSBC Holdings Plc, Europe’s largest lender, may not go through. Malini Thadani, spokesperson for HSBC India, declined to “comment on rumours’’.
The RBS spokesperson said, “RBS is in ongoing discussions for the remaining retail and SME (small and medium enterprise) assets it has decided to sell in Asia and we will not be making any further comment at this stage.”
This is the UK-based bank’s third attempt to sell its consumer banking assets in Asia, including India.
In the recent past, RBS had held talks for the sale of its Asian consumer banking assets with Standard Chartered Plc and Australia and New Zealand Banking Group Ltd (ANZ).
Standard Chartered Bank walked out of a deal, citing bad asset quality and high valuation. ANZ also had to forgo the Asian consumer banking assets of RBS, including those in India, on account of commercial and regulatory uncertainties.
In August, ANZ acquired the retail and commercial banking operations of RBS in Taiwan, Singapore, Indonesia and Hong Kong for around $550 million (Rs2,558 crore). It also acquired the onshore global banking and markets (GBM) and global transaction services (GTS) operations in the Philippines, Vietnam and Taiwan (excluding securities).
The bank’s consumer banking operation, which has been put up for sale, posted an operating loss of Rs230.77 crore last year.
In the previous year, it made a profit of Rs38.99 crore. Provisions for non-performing loans, or the money set aside for sticky assets, rose to Rs335.92 crore, almost nine times the amount that the bank had provided for in the previous year.
Fiscal 2009 was a rough year for foreign banks in India, as a slowing economy caused a rise in non-performing loans. But no other foreign bank saw a dip in profit.
Standard Chartered Bank’s India operations reported 12% growth in net profit; HSBC’s net profit rose 8%; and that of the Indian arms of Citibank NA and Barclays Bank Plc rose by 20% and 485%, respectively.