Mumbai: The India business plan of Royal Bank of Scotland, or RBS, which has acquired Dutch lender ABN Amro Holding NV, has hit a regulatory hurdle.
The Reserve Bank of India, or RBI, is not in favour of RBS operating ABN Amro’s Indian business under two separate entities: RBS and its private banking unit, RBS Coutts.
RBS, Fortis Group of the UK, and Banco Santander SA of Spain acquired the assets of ABN Amro in October. Fortis was to run the Dutch bank’s asset management unit in India while RBS was to acquire the wholesale, retail and private banking businesses.
According to the RBS plan, the private banking business was to operate under the RBS Coutts brand.
BRAND TROUBLE (Graphic)
“Every bank needs to have a single identity in the country and it cannot operate under two different names. Coutts and Co., though a private banking arm of RBS, is an independent entity,” insisted a senior RBI official who didn’t want to be named.
According to the same RBI official, Coutts is a separate entity and approval for use of the brand name would effectively mean allowing a backdoor entry for a bank. “They say these are parts of the same group, but need to avoid complicated structures. We are in dialogue with the bank,” the official added.
The international businesses of Coutts, one of the oldest private banks in the UK, were renamed RBS Coutts on 1 January after it was acquired by the Scottish lender.
ABN Amro Bank has sought the banking regulator’s approval for rebranding its business. It has had a few meetings with RBI, but the regulator is holding off on approving the plan. RBI’s discomfort over the idea of RBS running its business under two entities is now delaying the rebranding exercise.
ABN Amro Bank’s executive vice-president and country executive, Meera H. Sanyal, did not offer comment for this story.
The rebranding of the asset management firm is also pending regulatory approval in India. Globally, the asset management business was transferred to Fortis on 1 April. The capital market regulator, Securities and Exchange Board of India, or Sebi, has not yet cleared the application. Two officials at ABN Amro said the market regulator had referred the application to RBI.
“Worldwide, ABN Amro Asset Management is now a legally demerged entity from ABN Amro Bank,” a senior official at ABN Amro Asset Management Ltd said. “We have applied to Sebi for the change of name (to Fortis), and are awaiting clearance. It could come in any time.”
“ABN Amro is now owned by RBS and this is what we want to tell our customers,” the official added.
“This has been happening in other parts of Asia such as Hong Kong, Singapore and Dubai. We are awaiting a response from the regulator and we are in constant dialogue with RBI.”
Interestingly, the bank has sought the regulator’s approval for rebranding even before seeking its nod for the RBS acquisition of ABN Amro’s business in India. This is because even though the Dutch National Bank, the banking regulator, has approved the overall transition plan, the transfer of ABN Amro’s business in the Netherlands to RBS is still pending and is expected to be completed only in mid-2009.
Only after the completion of this process can RBS approach the Indian regulator for approval of the acquisition.
According to ABN Amro officials, the global division of its business is expected to be completed only in mid-2009. The bank sought RBI’s approval for the rebranding exercise to avoid confusion between brand identities in the interim period.
ABN Amro has been operating in India since 1920. It has 9,000 employees spread over 28 branches. The lender’s assets in India grew 28% to Rs36,617 crore in fiscal 2008, from Rs28,518 crore in 2007. Its Indian operation reported a 27% decline in net profit for 2007-08 to Rs280.6 crore, from Rs385.3 crore in the previous fiscal.
Sanat Vallikappen contributed to this story.