Mumbai/New Delhi: The Netherlands-basedABN Amro Bank NV has applied to the Reserve Bank of India (RBI) for a licence to open a branch in the country less than four years after selling the business to the Royal Bank of Scotland Group Plc (RBS) as part of a $97 billion (Rs 4.4 trillion today) global deal, four people familiar with the development said.
The move marks the second such instance of a bank returning to India in the past few months. In March last year, the Australia and New Zealand Banking Group Ltd (ANZ) received RBI approval to start a branch in the country, a decade after it had sold its business to the UK’s Standard Chartered Plc.
ABN Amro, now owned by the Netherlands government, plans to re-enter India to revive its core diamond financing business and also to tap fast-growing loan demand, said one of the people, a former executive with ABN Amro in India.
“ABN has extensive involvement in the diamond business and they want to stick with that. India being a global hub in diamond polishing and value addition, they want to be here,” he said.
ABN finances diamond buying and also provides post-shipment credit for diamond traders in India.
“Also, the economic growth and banking demand here makes it a profitable proposition for them,” he added.
If permission is granted, the venture is likely to be headed by Biju Patnaik, regional head (international diamond and jewellery group) at ABN Amro Asia. Patnaik was formerly head of the bank’s diamond business in India.
Patnaik did not respond to calls or text messages sent on his mobile phone on Wednesday and Thursday.
The ABN Amro press department did not reply to an email sent on Wednesday. Repeated calls to the bank’s press office did not yield any response.
“Currently, in India, Japan, Hong Kong and the United Arab Emirates, the international diamond and jewellery group (ID&JG) is operating through the Royal Bank of Scotland until these units are transferred to ABN Amro Bank,” the bank said on its website. ABN’s sole operation in India is the ID&JG unit, the website said.
ABN was acquired by a three-bank consortium led by RBS, and including Fortis NV and Banco Santander SA, in October 2007 in the biggest acquisition in the global financial sector.
As part of the deal, the Indian assets went to RBS while the Netherlands assets, including the ID&JG business, went to Fortis.
However, this led to RBS and Fortis racking up massive debt just as the global financial crisis took hold, forcing them to seek separate bailouts from the British and Dutch governments.
In October 2008, the Dutch government announced that it had bought Fortis Bank, including its interests in ABN Amro.
The new entity owned by the government of Netherlands was formed after merging Fortis Bank (Nederland) NV with ABN Amro Bank on 1 July 2010.
It is this entity that is planning a re-entry into India.
Meanwhile, RBS sold its retail and commercial banking business to the Hongkong and Shanghai Banking Corp. Ltd in July 2010 in a deal that is yet to get RBI approval. That’s because RBI had earlier declined to transfer RBS’ branch licences as the proposed transaction was a portfolio sale and not a complete buyout.
Foreign banks are preparing the ground for the possible relaxation of RBI’s licensing policy, besides ensuring they have a presence in the country to service clients, said Deepak Tiwari, analyst at Kisan Ratilal Choksey Shares and Securities Pvt. Ltd. “Banks like Standard Chartered have been in India for more than 100 years, but have less than 100 branches,” he said. “But going forward, the RBI has indicated a more liberal policy.”
The central bank wants foreign banks in India to incorporate locally. RBI discussion paper on overseas banks, released on 21 January, said the regulator prefers them to operate in India as subsidiaries of their parents rather than branches, as is the case currently, even as it spoke about a “less restrictive branch expansion policy”.
The policy is still under consideration.
“If these banks have Indian clients with business in Netherlands, for example, or Dutch clients with interests here, it makes sense to have a presence to arrange things like local currency financing,” Tiwari said.
Mark Robinson, ANZ Bank’s chief executive officer for South and South-East Asia, said in an interview to Mint in April that the bank chose to return because it finds the fast-growing economy too good a business opportunity.
“If you are an international financial institution, you must have a presence in India. The shape of it, the extent of it, is a secondary question. If you are in the top 15 economies of the world, you have to be in India,” he said.
A senior analyst at a brokerage said banks such as ABN Amro can’t afford to ignore India, but that the market is not of strategic importance.
“In India, RBI has still not opened branch licences to these banks, so it remains an opportunity only when their clients require services in good times. It’s only of strategic importance for some banks like Citi and Standard Chartered,” he said. He refused to be quoted because he does not track the bank.
Lisa Pallavi Barbora in Mumbai contributed to this story.@