Swiss financial services major UBS is closing its commercial banking business in India, and surrendered its banking licence on Friday 21 June, after struggling to expand beyond its sole branch in India's financial capital Mumbai.

India's banking environment is becoming more competitive, with several large business groups, including infrastructure major Larsen & Toubro and automobile manufacturer Mahindra and Mahindra, lobbying hard for banking licences in a country where around half the population is still 'unbanked'.

The UBS decision follows similar moves by American banks Morgan Stanley and Goldman Sachs.

Earlier in May, Morgan Stanley sold its wealth-management business to the UK's Standard Chartered bank for an undisclosed amount. Morgan Stanley, which started its India operations in 2008, could not achieve the growth it expected, and has decided to quit the country.

Barring New-York headquartered Citigroup, Wall Street banks such as JPMorgan and Bank of America Merrill Lynch have kept their distance from consumer banking in India owing to tough competition from domestic banks, alongside restrictions on setting up new branches.

"The decision to surrender the banking licence is in line with the Group's strategy to conserve capital and wind up its capital-intensive businesses. The bank today closed down its only branch in Mumbai," the Economic Times quoted an unnamed UBS official as saying.

Its wealth management and foreign exchange businesses will be wound down over a period of two years, resulting in a potential 50 job losses.

"The Group during this period would also consider transferring or running its wealth management business by establishing a representative office in the country. However, this is being debated internally," the official told the newspaper.

Moreover, "operating a branch in the country also means additional capital commitment and adhering to the minimum mandated lending to agricultural activities, which has played a drag," the newspaper quoted a second unnamed person as saying.

The UBS decision comes at a time when India's central bank is considering changes to bank licensing rules. Foreign banks and domestic banks could be granted separate licences in the future.