The proposed RBS India acquisition fell through due to HSBC's global cost cutting drive.
In the past two years the sale negotiations has hit regulatory and commercial roadblocks.
The Reserve Bank of India had given a conditional approval to the deal in December 2011, where in it declined transfer of RBS bank branches to HSBC.
The Reserve Bank of India does not permit automatic transfer of branches in an asset sale.
Meanwhile, RBS has decided to wind down its retail and small and medium enterprises business.
HSBC remains committed to pursuing growth in India, a key strategic market for the Group, through its existing operations,'' the bank said.
On the other hand, RBS will continue to wind down the retail & commercial business in India. It will also reduce the loan portfolios in line with the stated Group policy of running down Non-Core assets,'' said RBS in a statement.
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