New blow to UBS as Indian licence bid is put on hold

Mumbai: Indian authorities have put a bank licence application by UBS on hold pending the outcome of an investigation, the Reserve Bank of India said on Wednesday, in a new setback for the Swiss bank.

"An in-principle approval given to UBS has been kept on hold pending investigations," RBI spokeswoman Alpana Killawalla said.

Citing unidentified sources, the Mint newspaper said yesterday that the central bank had withheld the approval because of UBS' "reluctance to cooperate" with an investigation into alleged money transfers between an Indian businessman and a Saudi arms dealer.

The licence would have allowed UBS, the world's largest wealth manager, to launch private banking operations catering to rich clients in fast-growing India.

The delay is the second blow to UBS' efforts to expand in India in recent months and follows $18.4 billion in shock writedowns due to the subprime crisis, which has hit UBS harder than any other major European bank.

In December, UBS called off plans to buy Standard Chartered Bank's mutual funds business in India after authorities let the application expire. The deal had been valued at $118 million.

The Economic Times newspaper said at the time the deal faltered because the RBI was unlikely to approve the transaction in time to meet Standard Chartered's timetable.

Mark Panday, a spokesman for UBS in Hong Kong, said the group was cooperating with Indian authorities but declined to comment further.

"We cooperate with all the regulators in every jurisdiction in which we operate," he said.

UBS already has a broking and investment banking unit in India.

The pause on the retail licence application is unlikely to affect UBS's investment banking or wealth management business in India, which are overseen by the stock market regulator.