Despite the global banking and financial turmoil, the Indian banking industry is witnessing a robust growth under the influence of a changing regulatory environment, rapid technological advancements, heightened competition and consolidation. And according to a recent report by Pune based research firm, ValueNotes, this changing landscape in the banking industry is driving banks to explore the outsourcing option to achieve efficiencies.

Outsourcing revenues from the Indian banking industry are estimated at Rs. 4 b for FY08 and are expected to grow at a CAGR of 47% to touch Rs. 19 b by FY12. According to Arun Jethmalani, CEO, ValueNotes, "The outsourcing potential in the Indian banking industry will increase rapidly as banks strengthen their IT systems. Large international BPOs with their experience of serving global banks and an end-to-end services portfolio are better poised to capture this market in the long term."

Apart from the growth in the industry, centralization and penetration of IT systems, need to focus on core services, rapid scale up and introduction of new services are driving outsourcing in this industry.

The vendor landscape has over 50 large and small vendors. Large BPOs like WNS and Genpact traditionally catering to the international market are focusing on building their domestic BPO divisions.

The report also classifies the vendor landscape in the domestic banking BPO into four categories: International leaders (established BPO vendors with strong presence in international BPO market like MphasiS), India leaders (primarily focused on domestic market like Aegis, InfoVision and Omnia BPO), Emerging companies (companies building capabilities and currently offering specialized services on a small scale like Caretel, vCustomer) and 'Me-too' players (offering undifferentiated low value services).

According to Pranav Dixit, analyst and co-author of the report, with the high growth in this space, international multi-service BPOs will leverage on the expertise gained from global banks to garner business from Indian banks.

Large scale multi-city operations, partnerships, ability to quickly ramp up operations while maintaining quality and developing advisory capabilities will be key success factors for outsourcing vendors focused on the banking industry. According to Neeraja Kandala, analyst at ValueNotes, "With further de-regulation in the banking industry and entry of several new private and foreign banks, the addressable market for banking BPO is expected to grow to 10 times the current revenues."