INDIA BUSINESS WORLD - DECEMBER 1^st - DECEMBER 15^th - 2007

BANKS CAN'T BE COMMODITY BROKERS TOO: RBI

No Commercial bank will be allowed to own, either directly or indirectly, a commodity brokerage. The Reserve Bank of India (RBI) has spelt this out while giving its approval to British bank Standard Chartered for acquiring 49% equity in UTI Securities. This would require UTI Securities to hive off its commodity brokerage.

The move assumes significance as it could impact French banking major, BNP Paribas', open offer for Geojit Securities. The proposal has been languishing with RBI for months.

Senior officials said that the go-ahead to StanChart came with a caveat that UTI Securities will sell down its wholly-owned commodity broking arm. The Foreign Investment Promotion Board (FIPB) had earlier cleared StanChart's proposal to pick up a stake in its entirety, including the commodity broking outfit.

A section of the market feels that RBI's move could impact the BNP-Geojit deal. BNP Paribas had picked up a 27.18% stake in Geojit Financial Services in March. The open offer for an additional 20%, under the takeover code, is still pending, since RBI is yet to clear the application. There has been a lack of clarity on whether banks can hold a stake in commodity broking firms. However, unlike Geojit, commodity broking for UTI Securities is a small business.

UTI Securities will soon embark on a rebranding exercise. The UTI name can be used by the different entities only till January 15, 2008. The new name would be representative of the JV between the two stakeholders - StanChart and Securities Trading Corporation of India (STCI).

StanChart is also in the process of rebranding Standard Chartered UTI Securities India (Scuti). The name of the new company will be StanChart (India) Wealth Advisory Services. The primary dealer business of the company was earlier transferred to the bank.

STCI is likely to take over the commodity broking arm of UTI Securities. An in-principle nod for the takeover of the commodity broking arm has already been given. The central bank has given three months to hive off the subsidiary.

The board of UTI Securities is also being reconstituted with three members from StanChart and four from STCI. The Stan-Chart nominees are StanChart's India CEO Neeraj Swaroop, StanChart's regional head of consumer banking Murali M Natrajan and bank's head of strategic initiative (South Asia) & country head subsidiaries PR Somasundaram. Mr Somasundaram will be the new MD of the bank. StanChart has the option of increasing its stake to 74%. The move to pick up a stake in UTI Securities is important for StanChart as it also marks the entry of the bank into equity broking.