Standard Chartered’s acquisition of the Indian operations of BBK, hit a roadblock

StanChart had signed a non-binding agreement with BBK in June 2005. They had received an in-principle approval from the RBI. The two banks signed a final agreement on February 28 this year and later approached the regulator.

Reserve Bank of India (RBI) has allowed Standard Chartered Bank to take over only the assets and liabilities of Bank of Bahrain and Kuwait (BBK), but not its branch licenses.

StanChart had total assets of Rs 48,000 crore as on March 31, ’06, as against BBK’s size of around Rs 600 crore. BBK had two branches in India - Mumbai and Hyderabad, while StanChart has 81 branches in India.

However without the branch licence, which was the primary reason for acquisition, either the deal will not go through or the final pricing would come down drastically.

Normally, branch licenses are also transferred to the acquiring bank. The RBI move may be a dampner for expansion of foreign banks in India, as without branch licences, it does not make much sense to take over only the business of these banks.

M&A in Indian Banks