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In yet another instance of international businesses moving operations to India, American banking giant JP Morgan Chase plans to hire 4,500 staff in India over the next two years with an aim to move 30 per cent of its back office and support staff at its investment bank offshore by the end of 2007.
The plans are being seen as the most ambitious move till date by an international investment bank to take advantage of the low cost of highly educated staff in India.
The bulk of the bank's processing of foreign exchange trades will be carried out at its centres in Mumbai and Bangalore. It is also moving over much of the processing of credit derivatives contracts, an area where the United States and the United Kingdom regulators have expressed concern about backlogs across the industry.
Other investment banks are also planning to move operations to India and Stefan Spohr, of consultants AT Kearney, estimates that the US and the UK-based investment banks now have about 6,000 staff in India, of which half are directly employed, representing less than 5 per cent of their total headcount.
However, he predicts this could rise to as much as 20 per cent in the next few years.
"This is not a trend that will go away. Global resourcing is becoming part of the way of doing business," he said. Industry analysts have been quoted saying that salaries in India are 70-80 per cent lower and total costs about 40 per cent below US levels.
"The quality of the people we hire is extraordinary and their level of loyalty to the company unbeatable," Veronique Weill, head of operations at JP Morgan's investment bank was quoted as saying by the Financial Times.
JP Morgan is also seeking to tap talent that it can use elsewhere in the group and some of those hired for the new operations have already been transferred to the US.
The expansion in India is backed by Jamie Dimon, JP Morgan's famously cost-conscious chief executive-designate who recently visited the Mumbai facility, the paper reported.
JP Morgan, which had only 200 offshoring staff in India two years ago, is currently hiring between 300 and 400 graduates a month and plans a total of 9,000 by the end of 2007.
Some 3,000 will be working for the investment bank with the rest supporting the group's retail and commercial banking operations, including 2,000 call centre workers.