Recently, UBS AG (UBS) surrendered its banking license in India. However, UBS will continue with its investment banking and equities business through its subsidiary – UBS Securities India Private Ltd. – for the time being. The Swiss banking giant will probably apply for a separate banking license to continue with its wealth management operations under a representative office.
Nevertheless, the company plans to shut down its wealth management and foreign exchange business over a span of 2 years. This could result in 50 job losses overall.
In 2010, UBS began its Indian operations, which provided services primarily to large organizations and wealthy individuals, through lending, foreign exchange, and foreign commercial borrowing services. These catered principally to the bank's wealth-management customers.
UBS’s decision to quit its Indian operations comes subsequent to stringent regulations as well as a slowdown in the local economy. The Reserve Bank of India – the country’s central bank as well as regulatory watchdog – has demanded that foreign banks operate as wholly owned subsidiaries. The RBI in its recent annual monetary policy statement has proposed a new banking structure involving different licensing rules for domestic and foreign banks instead of granting the universal banking license.
Though the banking license would have given the Swiss bank a strong foothold in the Indian foreign exchange business, it meant additional capital obligation. However, UBS will be the second foreign bank to pursue wealth management business in India if it opts for a differentiated license. Earlier, in 2008, American Express Co. (AXP) was granted permission to operate credit card and travel-related businesses in India.
UBS was one of the major banks to have been adversely hit by the eurozone crisis. Given its declining revenues, the company was forced to reduce its costs by exiting its non-profitable arms and concentrating more on its core businesses.
Strict regulations and stiff local competition has kept away many Wall Street biggies from the commercial banking business in India. In the recent past, Morgan Stanley (MS) and The Goldman Sachs Group, Inc. (GS) have also discontinued their Indian operations.
UBS currently carries a Zacks Rank #3 (Hold).