Swiss banking major UBS has started to wind down its banking operations in India with the intention to exit all banking activities in the country,say sources.
The bank has decided to shut down its commercial banking business and has nearly completed the winding down of its commercial loan book,confirmed sources within the foreign lender. The move may be a precursor to UBS returning its banking licence to the Reserve Bank of India. FE could not verify whether the licence has already formally been returned.
The decision to exit banking in India may be partly linked to a broader global move driven by stricter capital requirements that been brought in as part of Basel III norms, explained a senior banker. These norms have forced a number of foreign banks to curtail their operations in markets like India and also pare down investments in Indian companies.
However,UBS would be one of the first to look at a complete exit from the banking business in India. UBS Securities,which has a separate investment banking licence issued by the Securities and Exchange Board of India,will remain operational.
UBS first decided to ramp up its commercial banking business in late 2010 when it started to actively lend to large Indian corporates including Reliance Industries. The lender also moved aggressively into the high-yield loan business over 2011 and 2012.
The businesses,however,failed to generate adequate returns and,hence,prompted the decision to exit both businesses. According to data provided by the RBI’s Profile on Banks report,UBS had outstanding advances of $6.2 billion at the end of March 2012; however the size of the book may have grown over 2012-13.
This is not the first round of cuts that UBS India has seen. In October 2012,UBS had decided to shut down its fixed income business in India as part of a global decision to exit the fixed income space. About the same time,the head of UBS’ investment banking business Ashok Mittal had also left the bank,leading to speculation that UBS would be substantially reducing the size of its operations in India. Prior to that in November 2011,Manisha Girotra,who had led the bank’s India operations for many years,had also chosen to quit the lender.