Mumbai: Hong Kong and Shanghai Banking Corp. Ltd (HSBC) on Friday said it will shutter its private banking business in India through which it provides asset-management services to wealthy individuals.

The decision was taken after a review of the bank’s global private banking business in India, as HSBC felt these customers could be served by its premiere banking services, which serve clients with a business relationship worth 25 lakh every year, according to Bloomberg.

“We will work closely with our clients to minimize the impact of this decision and give them a choice to move to HSBC Premiere," a spokesperson said.

HSBC’s India staff count stands at about 32,000 and there will be no change in that, the spokesperson added.

In February, The Indian Express had released a list of 1,195 Indians who had accounts with HSBC’s Swiss private banking arm, sparking a debate around the large amount of unaccounted-for money stashed in overseas accounts. The amount in these accounts, according to the newspaper, stood at 25,420 crore.

In May, finance minister Arun Jaitley said the government had filed 121 cases against HSBC’s Geneva account holders.

“The decision to shut down Indian private banking operations was not due to the government action against black money," the bank’s spokesperson clarified. “It was purely business related."

The private banking arm posted a $7 million profit before taxes for the first half of the year, while the retail banking and wealth management unit posted a $3 million loss, Bloomberg said.

In 2013, the bank had shut down its retail broking and retail depository service business. At that time, 300 employees in these divisions had been laid off.

HSBC India’s net profit rose to 1,490 crore on 31 March 2014, compared with 337 crore in 2003-04, according to data collated by Mint. The bank’s interest income rose to 7,466 crore, a long way from 1,267 crore at the end of March 2004.

In June, HSBC’s chief executive officer Stuart Gulliver announced a three-year plan to shut loss-making businesses and focus on fast-growing Asian economies. The plan talked about reducing the bank’s global work force by 25,000 after an increase in compliance costs.

Various tax, regulatory and law enforcement authorities around the world, including those in Belgium, France, Argentina, Switzerland and India, are conducting investigations and reviews of HSBC’s Swiss private bank in connection with allegations of tax evasion and fraud, money laundering and unlawful cross-border banking solicitation, HSBC said in its annual report released earlier this year.

In February 2015, a public prosecutor in Switzerland commenced an investigation of HSBC Swiss private bank, and the Indian tax authorities issued a summons and request for information to HSBC in India, the report added.

“In response to, and in parallel with, the tax investigations prompted by the data theft more than eight years ago, we have been completely overhauling our private banking business, putting the entire customer base through enhanced due diligence and tax transparency filters. Our Swiss private bank customer base and the countries we serve are now both about one-third the size they were in 2007," the bank said.

An income-tax department’s spokesperson declined comment.

B.M. Singh, former chairman of the Central Board of Direct Taxes, said the tax department is looking at the Indian entity only to seek more information about the bank account holders. “Any investigation will be conducted only against the Swiss arm," he said, adding that the sale of the private banking arm is unlikely to impact Indian investigations.

“The initial profitability and size was under pressure as cost of manpower in private banking globally is under scrutiny after serious pullout by the likes of Royal Bank of Scotland, Morgan Stanley and Deutsche Bank. The same vertical would now be offered directly as part of retail banking rather than a separate entity which would help cut down costs and bring in economies of scale," Sanjiv Bhasin, executive vice-president, markets and corporate affairs at India Infoline Ltd, said.

HSBC India joins international lenders such as Standard Chartered Plc, Royal Bank of Scotland and Morgan Stanley in deciding to shut down some of their businesses in India.

Earlier this month, London-based Standard Chartered, India’s largest foreign bank by number of branches, said it will be cutting down on its unsecured retail and corporate banking business in the country as part of its global strategy to reduce the level of stressed assets on its books. The lender also announced 15,000 job cuts as part of its restructuring strategy.

In September, RBS announced that it will be selling its India private banking business to Sanctum Wealth for 200 crore. In April, private-sector lender IndusInd Bank said it had bought RBS’s diamond and jewellery financing portfolio which was worth 4,500 crore.

Other European lenders, including Credit Suisse Group AG and Deutsche Bank AG, are also cutting thousands of jobs globally as they adapt to tougher regulatory demands on capital.

Remya Nair in New Delhi and Kavya Balaji in Bengaluru contributed to this story.