Morgan Stanley to exit Indian banking industry, citing new regulation

200px-Morgan_Stanley_Logo_1.svgAs part of its new business strategy, Morgan Stanley will allow its India banking license to lapse, citing new capital regulations.

“It is now planning to let the license lapse as it does not want to tie up capital and other resources on account of a review of its strategy,” a senior banker said, according to the Chicago Tribune.

Morgan Stanley, the sixth largest bank in America, will, however, continue to operate its investment banking unit and remain registered as a non-bank firm with the Reserve Bank of India.

An RBI-issued banking license lapses if it goes unused for one year, and while banks have requested in the past that the central bank provide an extension to keep their licenses valid, Morgan Stanley has decided to forego the extension. The bank is also in the process of selling its risk management division in India, The Times of India reports.

A banking license would have allowed Morgan Stanley to gain a position in India’s money and foreign exchange markets and to lend to firms it advises.

“But operating a branch in the country also means additional capital commitment and adhering to the minimum mandated lending to agricultural activities, which has played a drag,” a person familiar with the news said, according to The Times of India.

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