India Impedes Licence for UBS
by Dave Nixon
Story link: India Impedes Licence for UBS
UBS, Switzerland’s principal bank, has experienced an additional setback in India. The Reserve Bank of India has approved in principle to the licence although it has deferred the progression in anticipation of an investigation into an associated matter by the tax department.
The delay, the second for UBS since late December, when the same issue undermined the transaction by Standard Chartered of its Indian asset management unit to the Swiss bank.
UBS said that their application was pending. And that they fully co-operate with regulators in all jurisdictions.
It refused to comment further.
The holdup is a setback for UBS, which is eager to compound its existing presence in the country’s investment banking industry providing commercial banking and to fulfill wealthy individuals, through the building of a branch network.
India stringently controls the distribution of new commercial branch licences to overseas institutions, restricting them to around 18 a year typically.
Not withstanding these limitations, the country has develop into a significant foundation of development in Asia for a variety of foreign banks offering retail banking, including Citigroup, Standard Chartered, HSBC and ABN Amro.
The deferment of UBS’s application follows apprehension articulated by the Indian tax authorities to the Reserve Bank of India.
The Swiss bank has been asked for information concerning potential money laundering in relation toth the tax investigation of an affluent Indian businessman. Conversely, it is not considered to have been indicted with any criminal action.
The RBI said that the in-practice approval that they had given had been put on hold pending the investigation.
It offered no additional details.
UBS has progressed up league table in investment banking in India, and along with numerous other foreign banks, it has been waiting for three years for the branch licences to provide commercial banking and serve wealthy individuals.
UBS granted to pay $130m in January for the Indian fund management division of Standard Chartered, the London-based emerging markets bank, but the agreement failed after hold-ups in regulatory authorization.
Standard Chartered stated receiving numerous new bids for its 75 per cent stake in the mutual fund business, providing no additional details.
The Securities and Exchange Board of India said two years ago that it thought UBS may have activated a market fall in May 2004, which saw the benchmark index nose-dive 17 per cent, at one point, a record intraday fall.
Sebi then instigated a prohibition on UBS from issuing derivatives linked to Indian securities for a year, though this was reversed on petition.