Standard Chartered has sold its Indian mutual fund arm to a local finance group for 67 per cent more than planned.

The $205m (£103m) deal with Infrastructure Development Finance Company ends a long-running process in which Standard Chartered earlier agreed to sell the unit to UBS (NYSE: UBS - News) for $120m.

The sale fell through in December after the Swiss bank failed to receive regulatory approval because of concerns linked to a tax investigation.

The Standard Chartered unit, which ranks among the top 15 Indian mutual funds by assets, was regarded as a rare opportunity for newcomers to gain entry to the country's fast expanding asset management market.

Although India's stock market has plunged about 30 per cent during the past two months, an equities asset management unit is considered as having higher growth potential than a bond fund.

The acquisition by IDFC, a specialist in infrastructure and private equity investment, marks the Indian group's first major foray into fund management.

But the deal is still subject to regulatory approvals, which late last year scuppered Standard Chartered's earlier efforts to dispose of the unit.

The deal with UBS expired after the Reserve Bank of India refused to grant the Swiss bank a licence because of an investigation by the tax department into alleged money-laundering by a wealthy Indian businessman.

UBS has since been cleared to receive a domestic banking licence, but the approval came too late to save its bid for Standard Chartered's mutual fund business.

The UK-based emerging markets bank regards the asset management business as non-core to its thriving commercial banking business in India.

However, Jaspal Bindra, Standard Chartered's chief executive officer in Asia, said: "Standard Chartered will remain a distributor of asset management products in India. India is a key market and delivered record results in 2007."

Its value has risen since the UBS bid on the back of an increase in assets under management from $2.5bn to $3.5bn.