The Royal Bank of Scotland (RBS) is selling its credit card, mortgage and commercial banking portfolios in India to a local bank, for an undisclosed amount.

Ratnakar Bank, a small private-sector lender, will take over the accounts of 120,000 RBS customers and absorb employees associated with the above portfolios. These are reportedly valued at less than 4.5bn Indian rupees ($74m, £48m, €55m).

A statement from RBS reads: "The deal comprises over 1.20 lakh [120,000] customers. RBS is fully committed to support impacted customers and will be writing to inform on the next steps for them."

Consulting firm PricewaterhouseCoopers advised Ratnakar Bank on the deal, while Morgan Stanley represented RBS.

The transaction still requires the approval of the Reserve Bank of India (RBI) and the nation's antitrust regulator, the Competition Commission of India. Ratnakar Bank expects to complete the deal within three months.

"We will by then have a clear idea of the exact portfolio and number of employees. This deal will also give us access to cheap current account deposits," said Nitin Chopra, head of retail at Ratnakar Bank.

"We are also hoping to tap increasing trade finance and foreign exchange flows from these clients, which will also help us earn fees."

RBS will continue to own and operate corporate and institutional businesses, as well as private banking, in India.

The sale comes as RBS plans to close 21 of its 31 branches in the country. Operations will continue at branches in Mumbai, Kolkata, Delhi, Bangalore, Chennai, Gurgaon, Hyderabad, Noida, Pune and Vadodara.

The UK government owns 81% of RBS, following a bailout in the 2008 financial crisis. The bank has been trying to sell its India operations for over two years, amid pressure to shrink its global balance sheet.

Early plans were to sell parts of the India businesses to HSBC Holdings but that fell through in November 2012; the plan was not cleared by the RBI. The assets being sold now are 40% of the value of the assets offered to HSBC.

RBS was also in talks with a number of Indian banks, including Yes Bank, Axis Bank, ING Vysya Bank, Federal Bank and IndusInd Bank regarding this sale.

Started in 1942, Ratnakar Bank is India's smallest commercial bank and has a loan book of 63.8bn Indian rupees, as of 31 March. It has 130 branches and is backed by a number of private equity investors.