Royal Bank of Scotland's talks to sell some of its Asian assets to Standard Chartered remain in full swing, sources familiar with the matter said on Tuesday after a report they were on the rocks.

Asia-focused Standard Chartered has said it is in talks about small acquisitions in China and India, likely to cost up to $200 million. Sources familiar with the matter have said the talks involve the retail and small business operations that state-controlled RBS hopes to sell as part of a turnaround plan.

(The two sides) are at this stage fully engaged, and discussions regarding sales in all three locations (China, India and Malaysia) remain in full swing, one source with direct knowledge of the deal told Reuters on Tuesday.

Another source familiar with the matter said there were some obstacles in the complex negotiations, particularly over valuation, but said it was too soon to say whether they would derail the process.

In any negotiation there are issues that need to be solved, and they will take time, the source said.

The Financial Times had reported on Tuesday that the sale of RBS's retail and commercial assets in China hit a critical obstacle, with chances of a deal with StanChart falling to around three out of 10.

The paper said StanChart was disappointed to discover that far more RBS customers than it had envisaged were locked in to specific products, limiting any acquirer's ability to move them.

As a result StanChart is struggling to make the numbers (in China), the newspaper quoted a person familiar with the matter.

Standard Chartered declined to comment on progress in the talks. RBS said on Tuesday it was in ongoing discussions with bidders for the remaining assets it had decided to sell in Asia and would make announcements in due course.

RBS is selling the Asian assets as it pulls back to core markets after it was bailed out by the UK government. Industry sources have long said the sales could prove complex, with possible corporate customer defections, slowing growth in Asia and unpredictable regulation among the key risks.

Morgan Stanley, which is advising RBS, declined to comment.

(Additional reporting by Humeyra Pamuk and Victoria Howley, editing by Will Waterman)

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