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| RBS plans to shift small biz customers to separate div: Report |
| Press Trust of India / London Jun 11, 2009, 16:07 IST |
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The Royal Bank of Scotland is planning to shift its small business customers into a separate division as the British banking major is not able to generate profit out of them, but the move is expected to lead to some discrimination among customers, says a media report.
" (The) Royal Bank of Scotland is planning to transfer thousands of its small business customers to a separate division because it cannot make a profit out of them," The Times said in a report published online.
According to bankers, the report said, "the move will lead to some of them being treated more harshly than other customers".
The managers were instructed to divide customers into two camps. Some would be put into the bank's 'core' division, and others would be relegated to a 'noncore' category, citing an internal memo, the report said.
The memo further says that among the customers who should be considered for the noncore area are those on the most competitive loan deals, which RBS offered at up to two per cent above the Bank of England base rate.
Although RBS sold these loans to customers, the bank concedes that they are 'not profitable'. Customers who would be most affected by the creation of the noncore division are those who have taken out loans on property, the memo added.
Quoting a RBS spokesman, The Times said that the process would not affect how customers were treated.
"It is an internal exercise which will have no impact on current lending agreements with our customers or on day-to-day relationships," the spokesman said adding "however, it is an important next step in our plans to return RBS to financial health over the next three to five years."
Attributing to the memo, the daily noted that "new lending to noncore customers will only be provided once the existing debt has been restructured or repriced".
This is likely to mean that affected customers would not be able to tap RBS for any more funding unless they agree to a higher rate on their existing loan. In turn, if they approach another bank they would probably have to disclose that their application for a loan has been rejected, The Times report said.
The process of deciding how to categories customers is at an early stage. The memo says: "There is no need to advise customers of these changes at the moment."
In February, RBS said it would create a noncore division into which it would put 240 billion pounds of assets from across the bank. These would be run off or sold over time, The Times said.
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