The Royal Bank of Scotland has failed to offload its Pakistani business to rival MCB Bank after the 31 December 2009 deadline for regulatory approvals had lapsed without resolution.

In a statement the bank said that it had not received the necessary approval for the deal to push through. It can be recalled that RBS announced in August 2009 its plans to sell 99.37 per cent of RBS Pakistan to MCB in a bid to tighten its portfolio. RBS added that the Pakistani arm remains classified as a non-core asset and that a new buyer is being sought.

Media reports say that the Pakistani central bank had declined the transaction because MCB has an ongoing dispute over the status of its shares. According to the Financial Times, MCB deposited its shares as security.

Citing an unnamed local banking official, the news service said that RBS might have difficulty seeking a replacement to MCB, particularly with Pakistan's currently sluggish investment environment. "RBS will have to consider functioning as it is," the source was quoted as having said.

RBS Pakistan has over 300,000 customers.