ROYAL Bank of Scotland is in talks to sell its Indian retail and commercial operation just weeks after a deal to sell the business to HSBC collapsed.

Sources in India said RBS had started talks about a possible sale of operations, including the Indian branch network to the country's Yes Bank.

Taxpayer-owned Royal Bank has been trying to offload the Indian retail business since 2010 as part of a programme to sell non-core assets to help reduce its balance sheet.

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Six weeks ago Royal Bank announced that a deal, agreed in June 2010, to sell the unit to HSBC had lapsed, without giving reasons. The reverse followed a big setback in October when Santander pulled out of a deal to buy 316 branches in the UK.

RBS said at the time it would begin to wind-down its retail and commercial banking business in India, while meeting customer obligations.

It said the retail and commercial business was a profitable operation, which served 400,000 customers from 31 branches. The business accounted for 0.5% of the group's remaining £65 billion non-core assets at November 30.

Asked about the reported talks with Yes, an RBS spokesman said: "We are continuing to explore all wind-down options for our retail and commercial business in India. There will be no immediate change for our customers."

The disposal of the retail business in India will have no impact on RBS's markets, international banking and private banking businesses in the country.

Yes Bank has more than 350 branches across 200 locations in India, and says it intends to expand its network.