UBS is facing growing pains as financial regulators in India have put on hold the bank's expansion plans pending an investigation.
Indian authorities had earlier appeared ready to allow Switzerland's largest bank to move into the lucrative private banking market.
UBS had submitted the application in 2004 to provide traditional banking services including accepting deposits and offering interest. It already has brokerage and investment banking units in the country.
But on Wednesday a source within the Reserve Bank of India cited a "reluctance to cooperate" in a probe over the company's role in facilitating transfers between an Indian businessman and a Saudi arms dealer.
The delay is another blow to UBS, which in December was forced to call off takeover plans of a mutual fund business and which lost billions of dollars last year.
A spokesperson for UBS said the company was cooperating with authorities, but declined further comment.
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