Global banks that outsource work overseas will be forced to step up supervision of back office operations after lapses involving Indian offshore units.
The New York state banking regulator this week accused Standard Chartered of hiding $250 billion in transactions with Iran and did not give proper oversight to its back office operation in Chennai, India.
"If they don't put (in) enough oversight, governance procedures and practices, then you will have a problem with the satellite centre, whether that is located onshore or offshore," said Bundeep Singh Rangar, chairman of London-based IndusView Advisors, whose firm advises foreign companies, including technology firms, on doing business in India.
Drawn by an English-speaking population and wages that can be one-fifth those in the West, more than three-quarters of global banks have a direct or third-party offshore presence in India.
Bank of America Merrill Lynch, Barclays, Goldman Sachs, HSBC, JPMorgan and RBS are among financial giants employing thousands in India. These wholly owned offshore operations, running around the clock, are known as "captive" centres.
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