Standard Chartered has received the Reserve Bank of India's approval to acquire American Express Bank (AEB) from American Express Company (AXP) in a $823 million cash deal.
The approval came after the RBI permitted AEB to transfer its credit card business to American Express Banking Corporation (AEBC). "The RBI only gives one banking licence. It is the bank's prerogative to choose its line of business,'' said a banking source.
AEB wanted to retain its credit card and travel business in India by transferring it to a non-banking finance company (NBFC). This did not find favour with the RBI as the regulator was not comfortable with an NBFC issuing credit cards without having partnering with a bank. Amex then requested the banking regulator for a restricted banking licence to conduct credit card and travel-related businesses.
"The merger will add seven branches to our (Standard Chartered) network, in metropolitan areas such as Mumbai, Delhi, Bangalore and Pune. This will boost our private banking and financial institutions business. We will add close to 700 Amex employees to our existing staff. The integration is expected to take around 24 months,'' said Neeraj Swaroop, Regional Chief Executive, India and South Asia, Standard Chartered Bank.
The branch acquisition is significant considering that the RBI allows all foreign banks put together to set up an average 12 to 14 branches annually. Standard Chartered has around 81 branches in India, which is the largest network among foreign banks operating in the country.
Standard Chartered has also entered into an option contract with American Express Company to buy American Express International Deposit Company 18 months from now at the cost prevailing then. American Express International Deposit Company is based in the Cayman Islands and issues short-term, fixed-rate certificates of deposit to the AEB customers.
