Switzerland’s largest bank, UBS has announced that the bank has dropped plans to acquire mutual fund management business in India from the British group Standard Chartered.

UBS said in a statement, “Following the expiry of the sale and purchase agreement that it executed in January this year with Standard Chartered Bank, both the entities have decided not to continue negotiations regarding the acquisition of Standard Chartered’s mutual funds management business in India.”

Sources said that the Reserve Bank of India’s unexpected decision has forced UBS and Standard to allow the terms of the deal to lapse.

UBS Global Asset Management had in January 2007 bought 75% stake in Standard Chartered’s mutual fund business in India for Rs 516 crore.

In a few days, UBS had purchased the remaining 25% stake, which was held by Atul Choksey, the former co-promoter of Asian Paints, for Rs 129 crore.

The costs of abandoning the 147 million Swiss franc ($130.3 million) transactions would be "negligible" and would have "no material impact on the earnings of UBS. The bank would continue with an alliance set up in April with Standard Chartered Bank for fund distribution in Asia, UBS said in a statement.

While, Standard Chartered has quoted in a press release, “Throughout this year, this business has continued to grow and operate normally. Standard Chartered will now seek a new buyer by reinitiating the tender process.”

Standard Chartered AMC had assets under management of over Rs 17,000 crore as of November 2007. The Standard Chartered AMC presently manages 16 mutual funds, of which 10 are fixed income, two are asset allocation and four are equity. The equity funds represent around one-fifth of the total assets under management.