Royal Bank of Scotland Group (RBS) is in talks to sell its Indian commercial and retail unit to HSBC Holdings as Britains biggest government-owned bank accelerates international asset disposals, according to two people with knowledge of the situation.

The sides may agree a deal as early as next month, according to a source, who declined to be identified because the talks are private. The unit has about 1.3 million customers, 1,800 employees and 28 branches, according to the Edinburgh-based banks website.

Chief executive officer Stephen Hester is selling assets acquired by his predecessor, Fred Goodwin, who spent $100 billion and expanded the banks operations into more than 54 countries. The bank has announced the sale of four overseas units this week after agreeing to sales in Argentina, Kazakhstan, Pakistan and the United Arab Emirates.

Goodwin seemed to be expanding for the sake of it, said Bruce Packard, a London-based analyst at Seymour Pierce. Hester is now pursuing the right strategy in trying to slim down the bank.

Banco Santander SA, Spains biggest bank, offered as much as 1.7 billion pounds ($2.52 billion) to buy more than 300 RBS branches in the UK, according to a person with knowledge of the plans said.

RBS is making excellent progress in reducing the size of our balance sheet, making the bank safer, it said in an e-mailed statement.

Since the announcement of our strategic plan in February 2009 and the creation of our non-core division, we have exited or sold more than 20 businesses.

The banks assets ballooned to more than 2.2 trillion pounds, about 1 1/2 times Britains annual economic production at its peak in 2008. Following the worlds biggest bank bailout in 2008, assets fell to 1.58 trillion pounds at the end of March.

HSBC, Europes largest bank, on Thursday agreed to buy the RBS Kazakh retail unit for as much as $52 million in cash as it bolsters its presence in countries trading with China.

A spokesman for London-based HSBC declined to comment on talks about a possible purchase of the RBS India unit. At the moment, the bank has 2 million customers and 35,000 employees in 50 branches across India.

HSBC was previously in talks to acquire RBS assets in India, China and Malaysia, one of the people familiar said. The discussions broke down last year following objections from Indian regulators, the person said. RBS is still looking to sell the Chinese unit and may close the Malaysian business, according to the second person.

The bank is undergoing the most complicated restructuring of any company in history, CEO Hester said last month. RBS has identified 258 billion pounds of non-core assets to sell or run down by 2013, it said in its annual report in March.